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The View from the Outer

View from the outer: Healthy returns

Max Casey Tim Rocks Peter Dragicevich
9th July 2021

The global healthcare sector is one of the standout investment opportunities. Investors have been more focussed on tech and clean energy themes over the past year but focus is now returning to healthcare.
The longer term structural story for healthcare is compelling. The sector is on the cusp of a major wave of innovation and disruption, and COVID seems set to accelerate those trends and remove some of the regulatory inertia that has previously frustrated and slowed down change. Some issues here are:

  • COVID has exposed flaws in many healthcare systems. Governments will now rush to prepare for the next crisis by building hospitals, critical care and local supply chains for drugs and critical devices.
  • Strong growth was likely anyway due to ageing populations and rapid development of healthcare sectors in many emerging markets.

The forces for innovation, digitisation and disruption are also powerful. A few of the interesting changes that will become more apparent in coming years include:

  • COVID has opened the door to the digitization of medicine. One example is the widespread adoption of telemedicine.
  • Gene therapy will revolution the treatment of chronic disease as it involves a switch from the “one pill fits all” approach to personalized gene treatments. It could be a major disruption to companies providing existing cancer drugs and treatments.
  • Liquid biopsies are set to result in a major reduction in cancer mortality. Advances in DNA analysis are behind the development of a simple blood test that could detect multiple cancers at early stages of disease progression.

Recommendation

While there is significant potential in the healthcare sector there is also the threat that many incumbents will be disrupted. This means that longer-term investors should have a preference for active managers who can accurately assess the risks of disruption and the potential for success of new technologies and treatments.
We will constantly review the available exposures in this space but a few that may be considered now are:

  • Wholesale investors could consider the E&P Global Healthcare managed account. An actively managed option that is available to both wholesale and retail investors is the Platinum International Healthcare Fund.
  • Locally listed ETFs including HLTH (VanEck Global Healthcare Leaders ETF), IXJ (iShares Global Healthcare ETF) and DRUG (Betashares Global Healthcare ETF - Currency Hedged).
  • Offshore listed focussed healthcare ETFs such as IDNA (iShares Genomics Immunology and Healthcare ETF) and IHI (iShares U.S. Medical Devices ETF).

There are a number of ways to gain exposure to the investment themes considered in this report and investors should contact their Financial Adviser to discuss them in more detail.