Backing Innovation: Four funds for STEM-focused investors

National STEM Day is being held this Friday, 8th November, to help promote the fields of science, technology, engineering and mathematics. The aim of the annual event, which has been on the calendar for almost a decade, highlights their career benefits to younger people. This gives us the perfect opportunity to look at the various investment opportunities and highlight funds exposed to companies in these crucial areas.

The importance of STEM

STEM careers provide employment for millions of people around the world who are responsible for coming up with innovative ideas. In 2021, 24% of the US workforce (36.8 million people) were involved in STEM occupations, according to the National Science Board*. Meanwhile, official UK figures reveal there were 9.4 million STEM workers in 2023**. This equates to around a third of the total UK workforce.

The rapid pace of development in technology and engineering means an increasing number of job opportunities are likely to arise over the next decade. In fact, the US Bureau of Labor Statistics has predicted the number of people employed in STEM occupations will soar 10.4% by 2033***. However, there’s still a significant skills gap when it comes to how well equipped students are to embrace future challenges – and this illustrates the importance of STEM day.

While STEM careers provision in England has enjoyed notable developments since 2021, further work is required, according to a report from EngineeringUK. The study found challenges persisted in terms of staffing, time constraints and funding issues, to name a few.

Four investment opportunities to back STEM

As the sectors coming under the STEM umbrella are so popular, there’s no shortage of funds providing access to this important area of the market. Here we take a closer look at four portfolios, including those with a specific focus on STEM-related names, as well as those offering more diversified exposure.

Polar Capital Global Healthcare Trust

The aim is to generate capital growth by investing in a global portfolio of healthcare stocks within four main sub-sectors: pharmaceuticals, biotechnology, medical technology, and healthcare services.

The trust currently has 37 positions, with the 10 largest accounting for 46.9% of assets under management^. These names include international industry powerhouses such as Eli Lilly & Co, UnitedHealth Group, Novo Nordisk, Roche and Sanofi^. The trust’s managers, James Douglas and Gareth Powell, are constructive on the sector, given factors such as an ageing demographic developing more chronic diseases.

CCLA Better World Global Equity 

While this fund is more diversified across various sectors, it holds plenty of companies that will come under the STEM umbrella. These include Microsoft, Amazon, Thermo Fisher Scientific and UnitedHealth^. The fund also has roughly a quarter in information technology^. Via its Better World policy, this fund will pay close attention to companies’ ESG criteria, as well as using its ownership rights to ensure a detailed engagement and voting policy. We believe this fund, which aims to provide a total return over the long term, is worth considering by anyone wanting a global portfolio that also has an ethical focus.

Stewart Investors Asia Pacific Leaders Sustainability

This is another fund that’s heavily invested in STEM-related sectors, but principally in companies based in the Asia Pacific region. Information technology has a 22.5% share of assets, while healthcare accounts for 21%^. Mahindra & Mahindra, the Indian automaker, has the largest individual stock position of 8.9%, while other names include Samsung and Taiwan Semiconductor^. We like the boutique culture that guides this fund and its well-defined process. As a result, we see it as a core fund option in this sector.

WS Lightman European

Healthcare accounts for roughly 15% of the portfolio, which aims to provide long-term capital growth by investing in companies listed or domiciled in Europe. Prominent stock positions in this area include Sandoz, a Swiss company that is a global leader in generic and biosimilar medicines, Roche and Sanofi^. The fund’s manager, Rob Burnett, is very experienced and relies on an investment process that’s built upon years of academic research. His approach is all about being contrarian. However, it’s worth noting that this fund has a heavy value bias. This means it’s likely to be at the top – or bottom – of the performance tables.

*Source: National Science Board, The State of U.S. Science and Engineering 2024

**Source: gov.uk, Supply of skills for jobs in science and technology

***Source: US Bureau of Labor Statistics, Employment in STEM occupations, 2023 and projected 2033

^Source: fund factsheet, 30 September 2024