Pharmaceuticals, biotechnology and AI drivers

The healthcare sector, particularly the biopharma sub-sector, has seen budget cuts post-COVID-19 due to the decline in pandemic-related sales. However, we remain confident that the sector is experiencing a resurgence in investor confidence thanks to the digital revolution. 

The sector is being revolutionised by AI, medical imaging, telemedicine, and wearable monitoring devices.

Pharmaceuticals and biotechnology, with substantial R&D budgets, are expected to be significant drivers of growth in the sector. Investors who strategically position themselves in certain companies are poised for a good year. In addition, healthcare businesses with high barriers to entry and sustainable competitive advantages, such as Novo Nordisk and Eli Lilly, are positioned to thrive, particularly in areas such as diabetes and obesity medication.

We also anticipate some continuation of the stellar performance seen in 2023 by the global technology sectors, including the renowned ‘Magnificent Seven’, with Meta and Alphabet being our preferred choices within this elite group.

The strategic positions held in these sectors by the Old Mutual Global Islamic Equity fund, which takes a Shariah-compliant investment approach, yielded an impressive 31.3% return over the 12 months ending December 2023, sharply contrasting with the MSCI ACWI Index, which returned 22.8%.

An edge amid interest rate uncertainty

Currently, however, market volatility continues to persist due to uncertainty regarding anticipated interest rate cuts. 

Nonetheless, regardless of whether the Fed begins cutting rates before the end of the year or only in 2025, Shariah-compliant investing offers an attractive alternative for all investors due to its overall indifference to interest rates, given that it does not invest in credit-based instruments. This unique feature enhances attractiveness as a compelling investment option, especially in times like these when interest rates significantly influence market dynamics.

Contrary to common belief, Shariah-compliant portfolios are not only limited to faith-conscious investors, adding that approximately one in five investors in the asset manager’s Shariah-compliant retail portfolios are non-Muslim.

This highlights the offering’s broad appeal as a diversified investment option that addresses ethical, faith-based, and environmental, social, and governance (ESG) considerations.

The fund’s position has also been reinforced by recent market trends, where risk assets have rebounded following adjustments to US Federal Reserve policy. However, at this volatile time we are cognisant that the market could turn at any time; we therefore ensure that we continue to build a portfolio that can take market shocks should they arise.

For investors seeking ethical and diversified exposure to global equity markets, Old Mutual Investment Group’s global Islamic equity investment option offers investors a compelling opportunity for superior investment returns. With a focus on high-quality, attractively valued companies with favorable long-term growth prospects, the offering is suitable for investors with moderate to high-risk appetites. DM/BM

By Maahir Jakoet, Portfolio Manager, Old Mutual Investment Group