Isaly will no longer serve as a board member of the £1.3 billion trust. The management team, which includes Sven Borho and Dr Trevor Polischuk, will continue to run the portfolio.
In addition, Isaly will step down from the board of the London-listed Biotech Growth (BIOG) investment trust, which is also managed by OrbiMed.
OrbiMed said Isaly had taken the decision to retire, adding: 'The board would like to express its appreciation for Mr Isaly’s contribution to the success of Worldwide Healthcare Trust during his time with the company.'
In a broader statement, the New York-based healthcare investment firm said Isaly had taken the decision following 'years-long succession planning discussions'. His responsibilities as managing partner will be taken on by Borho, Carl Gordon and Jonathan Silverstein.
Isaly spent the past 22 years at the helm of the £1.3 billion global healthcare trust and launched OrbiMed back in 1998. Today, it has $14 billion under management.
Commenting on his decision to retire, he explained: 'I am extremely proud of what my distinguished partners and I have accomplished at OrbiMed and the difference we have made in the lives of patients worldwide.'
Borho, a partner at OrbiMed, described Isaly as a 'true visionary and has been an iconic investor in the healthcare sector for the past 45 years'.
Earlier this week, Stat News published a story based on interviews with five people who had accused Isaly of harassing them directly or had witnessed the behaviour.
According to the allegations, Isaly, the 72-year-old managing partner of OrbiMed, had shown hardcore pornography in the office, made lewd jokes and sexist comments and verbally abused female employees.
He is also alleged to have kept a set of breast implants on his desk that he would use as a stress ball, according to Stat News.
Isaly responded by denying the allegations, while OrbiMed said it had hired a law firm to investigate the claims.
Isaly is the first high profile fund manager to face sexual harassment claims since Hollywood mogul Harvey Weinstein was forced to leave the movie company he founded, after a barrage of sexual assault and harrassment allegations surfaced. This has since sparked a wave of accusations concerning the conduct of senior figures across media and politics.