Buying shares in an investment trust is a quick and relatively inexpensive way to help diversify your investments. It can also be a great way for retail investors to gain access to certain markets which would otherwise be restricted or hard to enter.
Private equity
Private equity has been one of the best-performing alternative asset classes in recent years, and that’s helped to attract billions in flows from sovereign wealth funds, pension companies and other institutions. It’s an area that’s largely closed off to direct retail investors, but there are a few investment companies, such as the HarbourVest Global Private Equity Limited (LSE: HVPE), which give them indirect access to this market.
What’s unique about private equity funds is that they typically invest in unquoted companies that are in the developing stage or have under-tapped potential. This means there’s the potential to generate higher returns than in the stock market, while improving portfolio diversification at the same time.
HarbourVest invests in a wide range of private equity funds which, in turn, gives it exposure to a broad-ranging portfolio of equity investments diversified by geography, stage of investment, vintage year, and industry.
And with a share price of 1,290p, HarbourVest trades at a 15% discount to its NAV, meaning prospective investors can effectively purchase shares in the fund for significantly less than the sum of its parts.
A healthcare fund poised for growth
Sector investing offers targeted exposure to company stocks in individual industries which can help you to pursue opportunities which affect specific parts of the economy.
One sector which I’m particularly keen on is healthcare. The sector offers huge potential, as it benefits from a number of long-term structural tailwinds, which include an ageing global population, a growing middle class in emerging markets, and innovation in new drug development. Of course, not every company will perform well in a sector that is benefiting from long-term trends, which means it’s important to diversify and spread your capital over a reasonable number of companies.
But instead of just buying the likes of GlaxoSmithKline and AstraZeneca, why not diversify geographically to potentially boost returns and reduce risk? After all, healthcare is a global business, so you’re getting foreign exposure from domestically-based businesses anyway. What’s more, the US has many more publicly-listed healthcare companies than the UK, particularly in the biotech sector, which means avoiding international companies drastically narrowing your investment universe.
That’s why most funds investing in the healthcare sector typically have a global outlook. And one fund which has caught my eye recently is the Worldwide Healthcare Trust (LSE: WWH), which I reckon to be a smart bet on the sector.
Since its inception in 1995, the fund has proven leadership, having been continuously run by two specialist investment veterans, Samuel Isaly and Sven Borho. Performance figures for the past five years show the trust earns a total share price return of 211%, easily beating its benchmark MSCI World Health Care Index’s performance of just 131% over the same period.