Health and well-being as an investment opportunity

Pre-pandemic several health indicators were moving in the right direction. Maternal and child health had improved, immunisation coverage had increased, and communicable diseases had been reduced. And having placed health well and truly centre stage over the past two years, the pandemic has also demonstrated the importance of universal health coverage and multi-sectoral coordination for health emergency preparedness. The trouble is, while we’ve all been focused on finding a Covid-19 vaccine, many other health issues have taken a back seat and it is likely history will show that the pandemic actually reversed years of progress towards improved worldwide health.

“All the money in the world can’t buy you back good health.” — Reba McEntire, singer and actress

The UN’s Sustainable Development Goal #3

The aim of the UN’s Sustainable Development Goal #3 is to ensure healthy lives and promote well-being for all. The associated targets aim to reduce the global maternal mortality ratio; end preventable deaths of newborns and children; end the epidemics of AIDS, tuberculosis, malaria and other communicable diseases; strengthen the prevention and treatment of substance abuse; ensure universal access to sexual and reproductive health-care services; achieve universal health coverage and more.

Healthcare and the pandemic

Covid disproportionately affects the elderly, the poor, refugees and migrants, and a broad range of vulnerable groups due to their specific health and socioeconomic circumstances – like poor living conditions and lack of access to high-quality public health care. In July 2021, the head of the WHO called attention to the “horrifying injustice” that 75% of the vaccine shots delivered globally so far were in just 10 countries*. Moreover, the collateral effects of the pandemic resulting from the global economic downturn, social isolation and movement restrictions, inequitably affect those who are already marginalised.

But some good has come out of the pandemic. For example, who would have thought a vaccine could be found, approved, trialed and distributed in just 10 months? James Douglas and Gareth Powell, co-managers of the Polar Capital Global Healthcare Investment Trust, recently talked us through the disruption in the healthcare industry as a result of the COVID-19 pandemic and how it’s led to faster acceleration in technology and improvements in the sector.

How can investors help?

Investing in solutions that ensure good access to quality healthcare for everyone, regardless of their financial, family or cultural background, can improve the quality of life of individuals and increase life expectancy within societies. One option is to invest in companies that provide health and social services, as well as infrastructure projects like hospitals and care homes.

The main drivers of healthcare remain unchanged: there is accelerating demand, as people are increasingly living longer. Demographic change is one of three mega trends Zehrid Osmani, manager of FTF Martin Currie European Unconstrained fund, is investing in in his portfolio.

“Demographic change includes an aging population,” he said. “And an aging population brings with it diseases such as obesity, diabetes and cancers. Fortunately, there are many ways to position a portfolio to capture some of the breakthroughs that are tackling these 21st century diseases, like bespoke healthcare, genomics and connected devices. More and more of the population will be wearing connected devices to give them direct feedback on their health – not just heart rate, but also blood oxygenation and blood sugar levels, for example.” He told us more in this podcast.

Indeed, the opportunities in new technologies that can help reduce costs and improve outcomes for patients, are far-reaching. Tom Walker, co-manager of Schroder Digital Infrastructure believes, “electronic health records will allow more personalised medicines and, as the medical industry collects more data, this will in turn lead to better outcomes for patients. The digital transformation is only just beginning. Every element of the digitisation of the medical industry will place more demand on Digital Infrastructure.”

Tom Slater, co-manager of The Scottish Mortgage Investment Trust which has about 22%** of the portfolio allocated towards healthcare, agrees. “Genomics is a particularly important technology that’s going to help drive personalisation of medicine for individuals.,” he said. “There’s no evidence at all that that trend is reversing. In fact, I would argue that it’s accelerating due to the ability to generate, store, and increasingly drive insight from vast amounts of data.

“For example, we own Tempus, what they’re doing, they’re now testing the genomic profile of about 20% of cancer patients in the US. And then they’re using that data to suggest treatment pathways in a way that a human physician could not because they would not have the encyclopedic knowledge of all the trials and the developments that are taking place. So, they can assist a physician in doing that.”

Learn more: Why healthcare is more than just pharma

Better healthcare technology is directly linked to infrastructure (UN SDG 9) as Tom Walker explains: “Digital Infrastructure enables a huge variety of technology that improves the health and well-being of individuals. Today’s smart phone can monitor distances run, heart rate, blood pressure, blood sugar levels to name but a few. Smartphones transfer this data via mobile phone towers which then link to data centres via fibre optic cable. However, these examples barely scratch the surface of the digital transformation in this area.”

Interconnected goals

Not surprisingly, Covid has disproportionately affected disadvantaged groups. Prior to the pandemic, an estimated 927 million people, or 12.7% of the global population, made out-of-pocket health-care payments representing more than 10% of their household budgets***. This pushed almost 90 million people below the extreme poverty line (UN SDG 1). With increasing poverty due to the pandemic and now high inflation, out-of-pocket health spending will likely pose an even greater threat to the poor than spending on other essentials, such as food and education.

*Source: The SDG Reckoning, M&G Investments, Oct 2021
**Source: Investing for the Future, Baillie Gifford, March 2022
***Source: UN Sustainable Development Goals, 2021 Report