Mitali Dhoke
Aug 16, 2024
Listen to Best Pharma Mutual Funds: SBI Healthcare Opp Fund vs. ICICI Pru Pharma Healthcare & Diagnostics Fund
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The healthcare and pharmaceutical sectors have always been integral to the global economy, given their direct impact on human health and well-being. These sectors have gained prominence, especially in the aftermath of the global pandemic.
Over the past few years, these sectors have experienced unprecedented attention due to the COVID-19 pandemic, which spurred innovation, research, and investment on a global scale. As of 2024, the global healthcare and pharmaceutical sectors continue to benefit from the tailwinds generated by the pandemic. The heightened focus on healthcare infrastructure, the development of new drugs and vaccines, and the increasing demand for healthcare services have contributed to robust growth in these sectors.
Governments worldwide are investing heavily in healthcare to enhance preparedness for future pandemics and address the rising burden of chronic diseases. This has led to increased spending on healthcare, which has been a boon for companies operating in this space. The government’s push for domestic manufacturing through initiatives like ‘Aatmanirbhar Bharat’ has further bolstered the sector’s prospects.
[Read: The Future for Pharma & Healthcare Looks Bright: Here Are 6 Mutual Funds to Invest in]
At present, the healthcare and pharma sector continues to play a critical role, driven by ongoing advancements in medical technology, biopharmaceuticals, and healthcare services. In India, the healthcare sector has also witnessed significant growth, driven by factors such as the expansion of health insurance coverage, increased awareness of preventive healthcare, and the government’s focus on improving healthcare access. The pharmaceutical sector, in particular, has seen robust growth, with Indian companies playing a pivotal role in the global supply of generic drugs and vaccines.
The Indian equity market has responded positively to these developments, with healthcare and pharma stocks performing well in 2024.
Do note past performance is not an indicator of future returns
(Source: ACE MF, data collated by PersonalFN Research)
The Nifty Healthcare Index and Nifty Pharma Index, which tracks the performance of major healthcare and pharmaceutical companies listed on the NSE, have shown resilience amid broader market volatility. Investors have recognised the defensive nature of healthcare and pharma stocks, which tend to perform well even during economic downturns, making them an attractive option for those seeking stability in their portfolios.
As a result, healthcare and pharma mutual funds have emerged as attractive investment options for investors seeking to capitalise on the growth potential of these sectors.
Healthcare and Pharma Mutual Funds are sectoral funds that invest primarily in companies involved in the pharmaceutical, healthcare, biotechnology, and diagnostics sectors. These funds offer investors a chance to tap into the growth of the healthcare industry, which is driven by factors such as rising healthcare expenditure, increasing life expectancy, and advancements in medical technology.
This article offers an in-depth comparison of two prominent healthcare and pharma mutual funds in India: SBI Healthcare Opportunities Fund vs ICICI Prudential Pharma Healthcare & Diagnostics (P.H.D) Fund, to aid you capitalise on the sector’s current momentum.
SBI Healthcare Opp Fund is an open-ended equity scheme that belongs to SBI Mutual Fund. It is a well-established sectoral fund focused on the healthcare and pharmaceutical sectors. Launched in July 1999, the fund has a long track record and has been a popular choice among investors seeking exposure to the healthcare sector.
Currently, the SBI Healthcare Opp Fund holds an AUM of Rs 2,979.52 crore and seeks to provide investors with long-term capital appreciation by investing in a diversified portfolio of companies primarily engaged in the healthcare and pharmaceutical sectors.
# – ICICI Pru Pharma Healthcare & Diagnostics (P.H.D) Fund
ICICI Pru Pharma Healthcare & Diagnostics (P.H.D) Fund is an open-ended equity scheme and belongs to ICICI Prudential Mutual Fund. It is another prominent sectoral fund focusing on the healthcare and pharmaceutical sectors. Launched in June 2018, the fund has quickly gained popularity due to its strategic approach to investing in the healthcare space and currently holds an AUM of Rs 4,500.25 crore.
ICICI Pru Pharma Healthcare & Diagnostics (P.H.D) Fund aims to generate long-term capital appreciation by investing in a diversified portfolio of companies across the pharmaceutical, healthcare, and diagnostics sectors. The fund invests in companies across the entire value chain of the healthcare industry, including pharmaceutical manufacturers, hospitals, diagnostic service providers, and biotechnology firms.
Investment Style and Philosophy:
– SBI Healthcare Opp Fund: is designed to tap into the growth potential within India’s healthcare sector. Its investment philosophy revolves around identifying companies across the healthcare value chain that demonstrate strong growth prospects, are driven by innovation, are expanding healthcare needs, and have favourable demographic trends. The fund’s style leans towards a growth-oriented approach, seeking companies that are positioned to benefit from the increasing demand for healthcare services, pharmaceuticals, medical devices, and diagnostics.
– The fund managers focus on a bottom-up stock-picking strategy, identifying companies with solid fundamentals, strong management, and sustainable competitive advantages. The investment style of the SBI Healthcare Opportunities Fund typically involves a mix of large-cap and mid-cap stocks, ensuring a balanced risk-reward profile.
– ICICI Pru Pharma Healthcare & Diagnostics (P.H.D) Fund: adopts a more focused investment strategy centred around capturing growth in these high-potential areas by investing in companies with strong R&D capabilities, robust product pipelines, and leadership positions in their respective markets.
– The fund managers employ a blend of top-down and bottom-up approaches, allowing them to identify macro trends in the healthcare sector while selecting stocks poised to benefit from them. The fund’s portfolio includes companies that are leaders in their fields, with a strong emphasis on innovation, scalability, and financial health.
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Performance Comparison: Rolling Returns
Data as of August 16, 2024
Do note past performance is not an indicator of future returns
The securities quoted are for illustration only and are not recommendatory.
(Source: ACE MF, data collated by PersonalFN Research)
The SBI Healthcare Opp Fund has shown impressive market performance over various timeframes. This remarkable performance highlights the fund’s ability to capitalise on the growth opportunities in the healthcare & pharma sector effectively.
Over the three-year period, the performance of the two funds begins to converge. SBI Healthcare Opportunities Fund posted an 18.47% CAGR, marginally higher than ICICI Pru Pharma Healthcare & Diagnostics Fund’s 18.02%. However, both funds continued to outpace the category average CAGR of 16.58% and the benchmark’s 12.36% CAGR, indicating their strong performance within the sector. The fund’s performance during the COVID-19 pandemic was particularly noteworthy, as it capitalised on the increased demand for healthcare services and pharmaceutical products.
SBI Healthcare Opportunities Fund’s data reveals consistent returns for longer-term performance, with a 23.49% CAGR over five years and 14.54% over seven years. The fund’s ten-year CAGR stands at 16.47%, underscoring its ability to deliver sustained growth.
In contrast, ICICI Pru Pharma Healthcare & Diagnostics Fund has a shorter track record, where it achieved a 24.60% CAGR over 5 years, outperforming both the category average of 24.13% and the benchmark’s 15.32%. Despite being a relatively new entrant, the ICICI Pru P.H.D. Fund has delivered impressive returns since its inception.
However, the short-term performance indicates that the ICICI Pru Pharma Healthcare & Diagnostics (P.H.D) Fund is well-positioned to benefit from the growth in the pharma sector. The fund’s performance is driven by its focused investment strategy and the fund manager’s expertise in navigating the healthcare sector.
Overall, both funds have shown strong performance, especially in the shorter term. Do note the fortunes of these funds are heavily tied to the performance of the healthcare and pharma sectors. Any headwinds faced by the sector can significantly impact their NAV. Moreover, past performance should not be the only element, it’s important to note that one may consider other factors like portfolio holdings, risk profile, and investment philosophy before making a decision.
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Portfolio Composition: Asset Allocation of Schemes
Both SBI Healthcare Opp Fund and ICICI Pru Pharma Healthcare & Diagnostics (P.H.D) Fund are popular choices for investments in healthcare and pharma sector-oriented funds, but their asset allocation strategies differ slightly.
Scheme Name Large Cap % Mid Cap % Small Cap %
ICICI Pru Pharma Healthcare & Diagnostics (P.H.D) Fund 44.50 23.31 26.89
SBI Healthcare Opp Fund 33.17 27.83 28.33
Data as of July 31, 2024
>Do note past performance is not an indicator of future returns
>The securities quoted are for illustration only and are not recommendatory.
(Source: ACE MF, data collated by PersonalFN Research)
Both ICICI Pru Pharma Healthcare & Diagnostics (P.H.D) Fund and SBI Healthcare Opp Fund focus on investing in healthcare and pharma companies, but their approach to diversification within that sector differs.
The ICICI Pru Pharma Healthcare & Diagnostics (P.H.D) Fund has a more significant tilt towards large-cap stocks, with 44.50% of its portfolio allocated to this category. This indicates a preference for established companies with stable revenue streams, offering more resilience in volatile market conditions.
The fund also balances its portfolio with a considerable allocation of 23.31% to mid-cap stocks, which represents companies with growth potential but slightly higher risk. Additionally, the fund has a notable 26.89% allocation to small-cap stocks, aiming to capitalise on the potential high returns these companies can offer, though they come with higher volatility.
On the other hand, the SBI Healthcare Opportunities Fund takes a more diversified approach across the market capitalisation spectrum. It has 33.17% of its portfolio invested in large-cap stocks, reflecting a relatively lower exposure to established companies compared to its ICICI counterpart. The fund shows a higher allocation to mid-cap stocks at 27.83%, indicating a stronger emphasis on companies with growth prospects that are yet to fully mature.
Furthermore, the SBI fund allocates 28.33% to small-cap stocks, slightly more than the ICICI fund, suggesting a higher appetite for risk and potential for capturing outsized gains from emerging companies within the healthcare sector. This higher allocation reflects a more aggressive approach, aiming to tap into the substantial growth potential of mid and small-cap companies in the healthcare and pharma sectors. The increased exposure to small caps indicates a willingness to accept higher volatility for the possibility of higher returns.
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Market Volatility: Risk Profile of Schemes
Investing in sectoral funds may offer benefits from the growth potential of the underlying sectors like – Healthcare and Pharma; however, understanding the scheme’s risk-reward profiles is crucial before investing.
Risk Ratio ICICI Pru Pharma Healthcare & Diagnostics (P.H.D) Fund SBI Healthcare Opp Fund
Standard Deviation (3 Year) 14.46 14.35
Sharpe 0.27 0.25
Sortino 0.60 0.52
Data as of July 31, 2024
Do note past performance is not an indicator of future returns
The securities quoted are for illustration only and are not recommendatory.
(Source: ACE MF, data collated by PersonalFN Research)
An investment with high volatility is considered riskier than an investment with low volatility; the higher the Standard Deviation, the higher the risk. Both funds exhibit similar levels of volatility, as indicated by their Standard Deviation over the past three years-14.46 for ICICI Pru P.H.D Fund and 14.35 for SBI Healthcare Opp Fund. This implies that investors in either fund would face comparable levels of price fluctuations in their portfolios, with only a slight edge in stability going to the SBI Healthcare Opp Fund.
In terms of risk-adjusted returns, the Sharpe Ratio for ICICI Pru P.H.D Fund is slightly higher at 0.27 compared to 0.25 for the SBI Healthcare Opp Fund. This suggests that the ICICI Pru P.H.D Fund has provided marginally better returns per unit of risk taken, making it a slightly more attractive option for risk-conscious investors who are looking for a balance between risk and reward.
The Sortino Ratio further refines this assessment by focusing on downside risk, and here, too, the ICICI Pru P.H.D Fund stands out with a ratio of 0.60 against the SBI Healthcare Opp Fund’s 0.52. The higher Sortino Ratio indicates that ICICI Pru P.H.D Fund has been more effective in minimising losses during periods of negative returns, making it potentially more resilient in bearish market conditions.
Remember, this comparison is just to give you an idea about the risk profile of the two best pharma mutual funds. Consider your risk tolerance and investment goals to determine which fund aligns better with your investment strategy.
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Top Holdings of the Schemes:
While both SBI Healthcare Opp Fund and ICICI Pru Pharma Healthcare & Diagnostics (P.H.D) Fund invest in the healthcare and pharma sector, their specific holdings and sector allocation reveal some key differences:
SBI Healthcare Opp Fund ICICI Pru Pharma Healthcare & Diagnostics (P.H.D) Fund
Company % Assets Company % Assets
Sun Pharmaceutical Industries Ltd. 12.70 Sun Pharmaceutical Industries Ltd. 15.28
Divi’s Laboratories Ltd. 6.61 Dr Reddy’s Laboratories Ltd. 6.82
Max Healthcare Institute Ltd. 6.50 Cipla Ltd. 6.75
Lonza Group Ag 5.63 Aurobindo Pharma Ltd. 5.44
Cipla Ltd. 5.18 Lupin Ltd. 4.72
Aurobindo Pharma Ltd. 4.33 Apollo Hospitals Enterprise Ltd. 4.53
Lupin Ltd. 4.28 Mankind Pharma Ltd. 4.08
Aether Industries Ltd. 4.20 Gland Pharma Ltd. 3.85
Jupiter Life Line Hospitals Ltd. 4.01 Divi’s Laboratories Ltd. 3.85
Gland Pharma Ltd. 3.88 Alkem Laboratories Ltd. 3.32
Data as of July 31, 2024
Do note past performance is not an indicator of future returns
The securities quoted are for illustration only and are not recommendatory.
(Source: ACE MF, data collated by PersonalFN Research)
The SBI Healthcare Opportunities Fund and the ICICI Prudential Pharma Healthcare & Diagnostics (P.H.D) Fund both have a strong focus on the Indian healthcare and pharmaceutical sectors, but there are distinct differences in their top holdings and sector allocation. Sun Pharmaceutical Industries Ltd. is the largest holding for both funds, making up 12.70% of the assets in the SBI Healthcare Opp Fund and a slightly higher 15.28% in the ICICI Pru P.H.D Fund.
This suggests that both funds are heavily invested in one of India’s leading pharmaceutical companies, indicating confidence in its growth potential.
For the SBI Healthcare Opp Fund, other major holdings include Divi’s Laboratories Ltd. (6.61%), Max Healthcare Institute Ltd. (6.50%), and Lonza Group Ag (5.63%), showing a diversified investment across pharmaceutical manufacturing, healthcare services, and a multinational player in the biotech sector. This reflects the fund’s strategy to capture value across different segments of the healthcare industry, including international exposure through Lonza Group.
On the other hand, the ICICI Pru P.H.D Fund’s top holdings after Sun Pharma include Dr Reddy’s Laboratories Ltd. (6.82%), Cipla Ltd. (6.75%), and Aurobindo Pharma Ltd. (5.44%). This fund also places significant emphasis on domestic pharmaceutical giants but with a slightly broader base within the Indian market, incorporating companies like Apollo Hospitals Enterprise Ltd. (4.53%) and Mankind Pharma Ltd. (4.08%), which focus on healthcare services and domestic pharmaceuticals, respectively.
Overall, while both funds are deeply rooted in the pharmaceutical sector, the SBI Healthcare Opp Fund offers more international exposure and diversification across healthcare services, biotech, and pharmaceuticals. In contrast, the ICICI Pru P.H.D Fund remains more focused on Indian pharmaceutical companies, suggesting a potentially higher concentration risk but also a strong bet on the domestic pharma industry’s growth. This allocation strategy might appeal to investors with a different risk appetite and outlook on the global versus domestic healthcare market potential.
This subtle difference in sector focus within the healthcare and pharma segments could influence the funds’ performance based on how those specific sectors perform.
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Expense Ratio of the Schemes
When comparing thematic funds, the Expense Ratio, which represents the annual fee charged, plays a crucial role in determining your returns. Here’s a quick breakdown of SBI Healthcare Opp Fund vs ICICI Pru Pharma Healthcare & Diagnostics (P.H.D) Fund:
Scheme Name Direct Plan Expense Ratio Regular Plan Expense Ratio
SBI Healthcare Opp Fund 0.92% 1.98%
ICICI Pru Pharma Healthcare & Diagnostics (P.H.D) Fund 1.07% 1.95%
Data as of July 31, 2024
Do note past performance is not an indicator of future returns
The securities quoted are for illustration only and are not recommendatory.
(Source: ACE MF, data collated by PersonalFN Research)
As you can see, ICICI Pru Pharma Healthcare & Diagnostics (P.H.D) Fund has a significantly higher expense ratio for both the plans as compared to ICICI Pru Manufacturing Fund. Do note even a small percentage point difference in expense ratio may accumulate over time and impact your returns.
SBI Healthcare Opp Fund’s lower expense ratio under the direct plan could be considered as a cost-effective option for many investors. However, on the contrary under the regular plan, SBI’s fund has a slightly higher expense ratio as compared to ICICI’s Fund.
Remember, a lower Expense Ratio translates to potentially higher returns over time, but a lower expense ratio should not be the only factor to be considered while investing in sectoral funds.
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Suitability of Investors to the Schemes:
SBI Healthcare Opp Fund is particularly suitable for investors who seek slightly better risk-adjusted returns within this sector. With a marginally higher Sharpe and Sortino Ratio compared to its SBI counterpart, it might appeal to investors who prioritise efficiency in balancing risk and return, especially during volatile market conditions. This fund could be a good fit for those who are looking for a more defensive approach within the sector, as it has shown a better track record of minimising losses during downturns.
ICICI Pru Pharma Healthcare & Diagnostics (P.H.D) Fund might suit investors who are looking for stable yet potentially rewarding exposure to the healthcare sector. While it has a slightly lower risk-adjusted performance, its nearly equivalent Standard Deviation indicates a level of volatility similar to that of the ICICI fund. This fund could be ideal for investors who are looking for long-term capital appreciation in the healthcare sector without a significant deviation from the industry’s average risk levels.
Due to their sector-specific nature, these funds are best suited for investors with a high-risk appetite and a strong belief in the long-term growth potential of the healthcare industry. Investors who are looking to diversify their portfolio with sectoral exposure and are comfortable with the inherent volatility that comes with such focused investments may find these funds appealing.
However, note that these funds focus on carrying a concentrated portfolio related to a specific sector. Ensure they complement your existing portfolio allocation to spread risk.
What Lies Ahead for Healthcare and Pharma Investments
The future outlook for healthcare and pharma mutual funds remains promising, underpinned by several long-term growth drivers. One of the most significant factors is the continued advancement in medical technology and innovation. The healthcare sector is expected to see further breakthroughs in areas such as artificial intelligence (AI), genomics, and personalised medicine. These innovations have the potential to revolutionise the diagnosis and treatment of diseases, leading to improved patient outcomes and creating new opportunities for investment.
Moreover, the global aging population is expected to drive sustained demand for healthcare services and pharmaceutical products. According to the United Nations, the number of people aged 60 years and older is projected to double by 2050, reaching 2.1 billion. This demographic shift will result in a higher incidence of age-related diseases, leading to increased healthcare spending and a growing market for pharmaceuticals and medical devices.
In India, the National Health Policy and initiatives like Ayushman Bharat are driving the development of a robust healthcare ecosystem. The government aims to increase the number of Pradhan Mantri Bhartiya Jan Aushadhi Kendras to 10,500 by March 2025. The Indian pharmaceutical sector is a global leader, supplying over 50% of global vaccine demand, 40% of generic drugs in the United States, and 25% of medicines in the United Kingdom. With around 3,000 drug companies and 10,500 manufacturing units, Indian firms provide over 80% of the world’s antiretroviral drugs for AIDS, earning India the title of ‘pharmacy of the world’ for its cost-effective and high-quality medicines.
In the Interim Union Budget 2024-25, the government allocated Rs. 90,659 crore (USD 10.93 billion) to the Ministry of Health and Family Welfare. The Indian medical tourism market, valued at USD 7.69 billion in 2024, is projected to reach USD 14.31 billion by 2029. Additionally, the government is targeting an increase in the medical devices industry’s valuation from USD 11 billion to USD 50 billion by 2030.
As the world continues to grapple with evolving healthcare challenges and technological advancements, the future outlook for the healthcare and pharma sector remains bright.
To conclude…
The healthcare and pharmaceutical sector continues to evolve and expand, driven by ongoing innovation and increasing global demand; both funds are well-positioned to benefit from these trends. However, it is important to note that the sector’s performance can be influenced by regulatory changes, patent expirations, and pricing pressures, especially in the pharmaceutical industry. Investors should also be mindful of the sector’s sensitivity to global economic conditions and geopolitical developments, which can impact the growth prospects of healthcare companies.
Despite these risks, healthcare and pharma mutual funds remain a compelling investment option for those with a long-term investment horizon. As always, it is crucial for investors to conduct thorough research, assess their risk tolerance and investment horizon, and seek professional advice before making investment decisions.
Both SBI Healthcare Opportunities Fund and the ICICI Prudential Pharma Healthcare & Diagnostics (P.H.D) Fund offer robust opportunities to capitalise on the growth of the healthcare and pharmaceutical sector, yet they cater to slightly different investor profiles. The choice between these two sectoral funds ultimately hinges on an investor’s suitability.
Disclaimer: PersonalFN does not receive any monetary compensation from the fund house or scheme names stated in the article.
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MITALI DHOKE is a Research Analyst at PersonalFN. She is an MBA (Finance) and a post-graduate in commerce (M. Com). She focuses primarily on covering articles around mutual funds including NFOs, financial planning and fixed-income products. Mitali holds an overall experience of 4 years in the financial services industry.
She also actively contributes towards content creation for PersonalFN’s social media platforms in the endeavour to educate investors and enhance their financial knowledge.
Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.
This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.
