Bellevue Healthcare hit by ‘surprise’ shareholder exodus

The £670m Bellevue Healthcare trust has been plunged into turmoil today after more than a third of its shareholders said they wanted to pull their cash from the fund.

As the fund launched its annual redemption scheme, which allows investors to cash out for the price of the trust’s underlying assets, some 36 per cent of shareholders said they would like to withdraw.

Analysts have now warned of potential issues over the more than £200m it will have to pay out to investors.

In previous years, redemptions have been “significantly lower”, noted Shavar Halberstadt, analyst at investment trust specialist Winterflood, at 0.1 per cent in 2021, 5.2 per cent in 2022, and 14.3 per cent in 2023.

The trust’s underlying assets have fallen 8.8 per cent over the last three years, while its share price has dropped by 14.4 per cent, compared to a 27.4 per cent rise in the MSCI World Healthcare index.

“It was not surprising to see meaningful redemptions, given the company had flagged it was expecting them and the disappointing recent performance,” said Deustche Numis analyst, Ash Nandi.

While Bellevue’s performance has picked up, with its underlying assets growing 13 per cent in the last year, that has lagged by around 17 per cent for its peer group.

However, its share price discount to underlying assets of 6.8 per cent is the “tightest in the peer group, and its dividend yield the second-highest,” said Halberstadt.

“Given these factors, we view the exit demand as somewhat surprising, and caution that a loss of scale can lead to wider issues,” he added.

Investment trusts have run into issues over recent years due to their shrinking size, as the consolidation of asset managers leaves them unwilling to buy smaller into trusts.

Deustche Numis analysts also flagged the trust may face difficulties liquidating enough of the portfolio to meet redemptions given that the firm “represents a meaningful portion of share capital” for some of its holdings.

Bellevue represents around six per cent of the shareholder base of its largest holding, diagnostic surveillance company Caredx, while holding over three per cent of the shares of at least two of its other companies. Caredx is also around ten per cent of the trust’s portfolio.

According to the trust’s monthly factsheet, it bought back four million shares during September, but even then, saw the gap between the value of its share price and underlying assets widen by one percentage point.

A recent report on the trust from Kepler Partners warned that Bellevue’s “focus on a single sector and dominance by one country [the US] brings specific risks” as the area of the market it focuses on “has been out of favour in the past couple of years”.

However, Kepler analyst Thomas McMahon struck a positive note, stating the trust’s fortunes may change as the rate-cutting cycle from central banks gathers pace.

The trust will shell out around £270m to investors from 22 November as a result of the redemptions.