Asset Classes and Strategy

COVID-19 has thrust the importance of healthcare into the spotlight for investors globally.

Current P-Es for the sector are high (17.3x), but still lower than that of global equities as a whole (20.6x). Expected earnings growth of 12% in 2021 reflects the upward trend, with momentum picking up steadily.

Consistent fund inflows have followed greater public awareness of the Healthcare sector, spurred by the race for a COVID-19 vaccine.

A possible Democratic sweep following the US senatorial elections in January 2021 poses regulatory risks – it can lead to a push to expand Obamacare, which will in turn limit the profitability of healthcare companies by placing caps on drug prices and services. However, growing demand for healthcare goods and services will sustain the Healthcare industry amid periods of economic disruption or policy changes.

At the same time, the pace of progress on potential COVID-19 vaccines highlights the scope to adopt new and emerging technologies (Figure C4). These benefit areas such as biopharmaceuticals and medical technology; and allow healthcare providers to achieve greater efficiencies and provide new methods of service and care.

One example is the use of cloud computing and machine learning in developing gene therapy. Gene therapy requires significant computing power to identify and reverse the effects of a defective gene, and creates the potential to treat almost 100 devastating diseases, including Alzheimer’s Disease, diabetes, cancer and HIV/AIDS. Meanwhile, ongoing trials demonstrate the potential of Artificial Intelligence (AI) to predict and diagnose diseases more quickly than even the most experienced medical professionals. AI can also be effective in supporting the daily needs of patients, helping to ensure dementia patients take their medication regularly, or keeping them engaged via virtual interactions.

Acceleration in digitalisation has also increased the demand for new services like telemedicine. This is expected to grow by 21% annually to USD 176 billion by 2026 ⁶ .

These exciting developments in the Healthcare sector are key reasons why it deserves a place in long-term investment portfolios.