The healthcare sector has been at the forefront of this rally, and Hargreaves Lansdown’s Richard Troue (pictured) thinks the best could still be yet to come."These funds have rallied pretty strongly over the past year and there probably is more to go," he said. "We’re seeing it across the board from managers like Neil Woodford and Bill Mott on down to specialist healthcare managers like AXA’s Gemma Game."
FE Alpha Manager Woodford’s overweight in some of the UK’s top healthcare and pharmaceutical stocks has been one of the main drivers of his outperformance in the rally.
"They all feel we’re entering a new era of biotechnology and healthcare innovation," Troue added.
However, Troue says the sector is not without its risks and recommends investors take a 10-year view if they want to get involved; he also says they should drip-feed their money in to protect against short-term falls.
"I think there are elements of long-term opportunity [in healthcare]," he continued. "Investors should be aware that there is the potential for profit-taking, especially if situations in the European Union and emerging markets flare up again."
"I’d look to phase your money in over the next six to 12 months because if things fall a bit you’re safe in the knowledge that you didn’t put everything in in one go, but you wouldn’t have missed out on all the [upside] either."
Here are three top-quality funds from the sector that is leading the global rally.
L&G Global Health & Pharmaceutical Index
The best-performing fund in the IMA Global sector over the last year is the £72.8m L&G Global Health & Pharmaceutical fund.
Since the start of the year, the index tracker has picked up 21.25 per cent, slightly behind its custom benchmark – a mix of the FTSE World Pharmaceutical & Biotechnology and FTSE World Health Care indices.
The IMA Global sector gained just 11.55 per cent over the period.
Performance of fund vs sector and index in 2013
Source: FE Analytics
The fund has consistently outperformed the sector over one, three and five years, returning 90.61 per cent over the last half a decade, while the sector made just 26.64 per cent according to FE Analytics.
It has a yield of 1 per cent.
Nearly 60 per cent of the portfolio is invested in North America, with blue chip pharmaceutical giants Johnson & Johnson and Pfizer ranking as its top-two holdings.
The fund is also heavily invested in Swiss pharma giants Novartis and Roche as well as UK-based GlaxoSmithKline – a major constituent of Woodford’s portfolios.
The tracker is the least volatile of the funds on this list: its annualised score of 11.92 per cent over the last year is broadly in line with the FTSE All Share's 10.88 per cent.
The fund requires a minimum investment of £500 and has an ongoing charges fee (OCF) of 1.15 per cent.
Schroder Global Healthcare
The next best-performing portfolio in the equity rally has been Schroder Global Healthcare, headed up by John Bowler.
The £85.7m fund is a top-quartile performer over one, three and five years.
Over the last 12 months it has made 27.02 per cent – well ahead of the sector, although slightly behind the 30.89 per cent made by the MSCI All Country World Healthcare index.
Performance of fund vs sector and index over 1yr
Source: FE Analytics
The fund has a nominal yield of 0.33 per cent.
It does not list UK giants Glaxo or AstraZeneca in its top holdings. Instead, Bowler favours Roche, Novartis, Johnson & Johnson, Pfizer and Sanofi.
Troue says the team at Schroders is very well resourced and would be one of his recommendations for investors who are looking to access the healthcare story.
He adds that the team looks beyond the usual blue chip names down to smaller, more niche companies that can add additional Alpha.
The fund has a slightly higher annualised volatility than the other two portfolios over the past year, at 12.23 per cent.
It requires a minimum investment of £1,000 and has an OCF of 1.69 per cent.
FF Global Health Care
Rounding out the top-three is the €390m FF Global Health Care portfolio.
It has gained 26.01 per cent over the last year, and is top quartile over three and five.
It is a third-quartile performer over the last decade, however.
The fund, headed up by Hilary Natoff, has made 20.71 per cent since the start of the year alone, while the MSCI All Country Would Healthcare index gained 22.07 per cent, according to FE Analytics.
Performance of fund vs sector and index in 2013
Source: FE Analytics
The fund’s top holding is Johnson & Johnson, followed by Sanofi. Natoff is also backing German chemical and pharmaceutical company Bayer, as well as Glaxo, Pfizer and Novartis.
The fund has an annualised volatility score of 12.11 per cent.
It requires a minimum investment of £2,500 and has an OCF of 1.95 per cent.