Interest in healthcare investments has traditionally been unusually low, says one investment executive, but political decisions in the U.S. and China mixed with an aging population are turning healthcare into a very hot commodity.
“The implementation of the Affordable Care Act in the United States is driving more investment in the sector,” says Dean Orrico, president and chief investment officer at Middlefield Capital Corporation, who recently introduced the addition of the Middlefield Global Healthcare Dividend Fund to its stable of mutual funds. “You have to look outside of Canada, as we are seeing opportunities in Europe and the U.S.”
Coupled with an aging population in need of more and more health care, and China putting more money to work in making health care affordable in that country, there is an investment market that looks to continue its substantial growth.
“Middlefield has been investing in the healthcare sector across our various global mandates for a number of years,” Orrico told WP
. “Our focus is on more established providers like big pharma – Roche (Pharmaceuticals). More and more investors are looking at this with a long-term focus.”
Global healthcare securities have historically generated strong risk-adjusted returns versus U.S., Canadian and global equities. In particular, Orrico sees investments in Switzerland producing healthy results.
Healthcare is underrepresented in Canadian investment portfolios, says Orrico, representing approximately 6% of the S&P/TSX Composite Index, which highlights the importance of investing in a globally diversified portfolio for exposure to this industry.
While market highs for this year have been driven by sectors like consumer staples and information technologies, health care has played an integral role as well.
One exchange traded fund that made a lot of noise in 2014 was First Trust Dorsey Focus 5 ETF which generated $1.2 billion in first-year revenue. That ETF’s sector holdings include biotechnology and health care.