Back to the Future for Healthcare Investing

September 27, 2021 — London

Europe’s investors are looking to reap the benefits of long-term trends

As the world contemplates life beyond COVID-19, European investors are looking to leverage the attention focused on the broader healthcare industry during the coronavirus pandemic, according to the latest issue of The Cerulli Edge―European Monthly Product Trends.

During the race to find a vaccine, the share price of pharmaceutical companies vacillated based on the prospect of a breakthrough. Healthcare funds followed suit. Now, despite concerns around the delta variant, rising vaccination rates globally have provided some comfort.

“In 2020, investors used healthcare exchange-traded funds (ETFs) to place tactical ‘vaccination’ bets,” says Fabrizio Zumbo, associate director. “Today, the narrative is slowly shifting back to longer-term themes such as the aging population, genomics, telemedicine, and wider health-tech, all of which have been accelerated by the pandemic.”

Net new flows into healthcare and biotech ETFs have slowly crept up this year, with such products collectively registering €1.1 billion (US$1.3 billion) of inflows in the past three months alone, Morningstar data shows. By way of comparison, such ETFs gathered around €2.6 billion across the whole of 2020. 

Biotech ETFs are one of only four sector equity ETF categories—the others being infrastructure, water, and private equity—to experience positive net new flows in every month this year up to and including August. “The need and ability to maximize the use of technology in the healthcare sector has been given a boost by improvements to connectivity over the past 12 months,” notes Zumbo.

The healthcare industry consists of a vast pool of companies, old and new. This means that funds can vary significantly in practice. Several of the ETF issuers Cerulli spoke with said that investors—especially professional ones—have increasingly been looking at the underlying composition of sector and thematic portfolios to understand a fund’s merits more deeply. Although many of the ETFs in the sector invest with a global or U.S. mandate, Europe is a major force in healthcare, with some European countries being home to key players in digital healthcare and innovation.

Governments around Europe are set to introduce new requirements in terms of what needs to be done to advance healthcare systems, including increased digitalization; Cerulli expects this to create new investment opportunities. 

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Note to editors

These findings and more are from The Cerulli Edge—European Monthly Product Trends, September 2021 Issue.

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