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| September 30, 2010 |
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While the S&P North American Health Care Sector™ benchmark participated in the market rally during the third quarter of 2010, it generated a high single-digit return, compared to the double-digit return of the broader S&P 500® Index. The Munder Healthcare Fund, while also posting a strong return, underperformed its S&P North America Health Care Sector™ benchmark for the quarter. Some of the Fund's holdings failed to meet earnings expectations and there was disappointing news regarding the new product pipeline for some companies held in the Fund.
A number of pharmaceutical holdings had a positive impact on the relative performance of the Fund, including Endo Pharmaceutical Holdings, Inc. (0.9% of the Fund), Alexion Pharmaceuticals, Inc. (1.1%) and Warner Chilcott PLC (0.5%). Both Endo Pharmaceutical and Alexion posted strong earnings and had positive pipeline/R&D news. Warner Chilcott announced a re-capitalization plan during the quarter and subsequently paid a special dividend. Another strong performer was Bruker Corporation (0.9%), which is in the life sciences tools & services segment of the Fund. The company reported solid earnings and continued to benefit from government stimulus spending. Relative performance also benefited from an underweight in certain medical technology stocks, including Zimmer Holdings, Inc. (0.4% of the Fund) and Medtronic, Inc. (2.9%).
The weak performance of other holdings tended to be the result of company-specific issues and was not necessarily related to earnings disappointments. Amedysis, Inc. announced a government investigation and also issued weak earnings guidance. The stock was eliminated from the Fund in August. Lincare Holdings, Inc. (0.3%) declined on fears that reimbursement reductions might be more severe than first thought. Despite posting strong earnings, two drug distributors - AmerisourceBergen Corp. (1.3%) and McKesson Corp. (2.0%) - corrected during the quarter because of concerns over the timing of future generic drug launches that typically provide a boost to earnings. Finally, VIVUS, Inc., a late-stage drug development company, received a negative vote from a drug advisory panel on its weight loss drug Qnexa. This reduced the likelihood of FDA approval and the stock experienced a significant correction. |
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| June 30, 2010 |
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Reflecting the negative tone of the stock market, both the Munder Healthcare Fund and its S&P North American Health Care Sector™
benchmark posted a double-digit negative return for the second quarter of 2010, with the Fund lagging its S&P benchmark. The timing
of the passage of health care legislation gave management teams a very narrow window to digest the provisions of the bill before
their earnings releases. Many companies, especially pharmaceutical manufacturers and profitable biotech companies, were caught
off guard by the lower drug prices they will receive from Medicaid, which resulted in reduced growth estimates.
The Fund benefited from being underweighted in managed care stocks, especially WellPoint, Inc. (1.6% of the Fund) and Aetna, Inc.
(0.7%). In addition, there were a number of stocks that had a positive impact on relative performance. AmerisourceBergen Corp.
(1.8%) posted continued strong earnings based on new business wins and increased generic utilization. Watson Pharmaceuticals,
Inc. (1.5%) also posted strong earnings and its Arrow acquisition remained on track. Ev3, Inc. (0.7%) announced that it was being
acquired by Covidien Ltd. Vivus, Inc. (0.1%) reported some positive phase three data on a key drug development.
Relative weakness was more or less company specific. In addition to the lower drug prices that it will receive from Medicaid, Gilead
Sciences, Inc. (2.8%) suffered from concerns over decelerating growth as its key HIV drugs mature. Kinetic Concepts, Inc. (1.2%)
declined on fears that its key wound therapy business was not stabilizing. Despite strong earnings, Teva Pharmaceutical Industries
Ltd. (1.3%), Medco Health Solutions, Inc. (2.4%) and McKesson Corp. (1.9%) all lagged the benchmark on general fears over the
impact of health reform.
During the quarter, the Fund’s industry weights were changed as a result of the analysis of reported earnings. Specifically, branded
pharmaceutical exposure was reduced due to the impact of health reform and the expectation of reduced earnings over the next few
years due to increased Medicaid discounts and a new excise tax. We continue to favor generic drug companies within the
pharmaceutical sector. An overweight in health care providers and services, which largely reflected increased positions in hospitals
and drug distributors, was continued. The Fund remained underweighted in equipment and supply companies as we continued to
believe that the potential for relative earnings growth in this segment is not as powerful as in other health care industries at the
present time, especially in cardiac and orthopedic industries. |
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| March 31, 2010 |
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Although most of the Fund's holdings met or exceeded earnings expectations, the Munder Healthcare Fund underperformed its S&P North American Healthcare Sector™ benchmark for the first quarter of 2010. The Fund's underperformance was primarily due to a few stock-specific issues, as well as the lack of ownership of some of the smaller-capitalization stocks that announced merger news or positive pipeline developments.
Now that health care reform legislation has been signed into law, the ongoing debate over health care should subside. We continue to believe that the rules will be less onerous than first thought and that most companies should be able to manage through the proposed increases in taxes and regulations, with the exception of health insurance companies. We therefore expect stock volatility in the health care sector to subside, with investors and health care companies returning to a focus on fundamentals.
A number of the Fund's holdings had strong absolute and relative performance for the quarter. Amedisys, Inc. (1.1% of the Fund) continued its rebound due to another strong earnings report and proposed Medicare reimbursement cuts that were smaller than expected. Drug distributor and pharmacy benefit manager (PBM) companies, including Catalyst Health Solutions, Inc. (0.6%) and AmerisourceBergen Corporation (1.7%), were solid performers due to strong earnings growth as prescription volumes continued to rebound. Kinetic Concepts, Inc. (1.3%), which won a patent dispute against Smith & Nephew PLC, was one of the strongest performers in the Fund for the quarter, on both an absolute and relative basis. The Fund's hospital segment also contributed positively to relative performance, with Health Management Associates, Inc. (1.2%) being one of the strongest performers in this segment. The company is perceived to be a beneficiary of health care reform, with fewer uninsured patients expected to flow though emergency rooms.
In contrast to these strong performers, Warner Chilcott PLC (1.0%) lagged as investors took profits after a strong rally last quarter. The Fund continued to own the stock, as we believe its valuation is still attractive. Mednax, Inc. (0.5%) lagged the benchmark because of concerns over Medicaid and Medicare reimbursements that we believe were overblown.
There were no material changes to the Fund's segment weights during the quarter. The Fund was still overweighted in the pharmaceutical segment, as we continued to favor generic drug companies and firms with merger and acquisition (M&A) potential. The Fund also continued its overweight in health care providers and services, which mainly reflected increased positions in hospitals, drug distributors and managed care companies. The Fund's holdings in biotechnology companies were also increased during the quarter, with the addition of a few companies that have some promising pipelines of new drugs. In addition, we believe biotech companies are more prepared for co-pay issues on expensive drugs, which caught many companies off-guard last year. The Fund was still underweighted in equipment and supply companies at quarter-end, since we believed that relative earnings growth was not as powerful in this segment as in other health care industries, especially in the cardiac and orthopedic segments. |
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Past performance does not guarantee future results. The Fund's investment objectives, risks, charges and expenses must be considered carefully before investing. The prospectus and summary prospectus contain this and other important information about the Fund. To obtain a prospectus and summary prospectus, click here. Read the prospectus and summary prospectuses carefully before investing.
RISKS: The Fund concentrates its investments in health care-related securities, particularly within the pharmaceuticals industries, and is therefore subject to higher market risk and price volatility than funds with more broadly diversified investments. Investors should also note that the Fund may invest up to 25% of its assets in foreign securities, which involve additional risks due to currency fluctuations, economic and political conditions, and differences in financial reporting standards.
Fund holdings mentioned in the Quarterly Commentary are as of 8.31.10 and the percentages shown are based on net assets as of that date. Fund holdings are subject to change and should not be considered purchase recommendations. There is no assurance that the securities mentioned remain in the Fund’s portfolio or that securities sold have not been repurchased.
The S&P North American Health Care Sector IndexTM is a modified capitalization-weighted index designed to measure the performance of U.S. publicly-traded securities in the health care sector. The S&P 500® Index is a widely recognized capitalization-weighted index that measures the performance of the large-capitalization sector of the U.S. stock market. You cannot invest directly in an index, securities in the Fund will not match those in the index, and performance of the Fund will differ. Although reinvestment of dividend and interest payments is assumed, no expenses are netted against an index’s returns.
Munder Funds are distributed by Funds Distributor, LLC 10/10
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| Munder Funds distributed by Funds Distributor, LLC. |
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