The growing demand for pharmaceuticals in emerging markets should make health a compelling long-term investment theme, as countries such as China commit £125bn to support healthcare reforms between 2009 and 2011, with similar policies in Russia and Brazil.
This is being driven by a rapid rise in emerging market incomes, state healthcare insurance expansion and health infrastructure building. Pharmaceutical sales from the east are eclipsing those of developed markets.
"In emerging markets, branded drugs dominate the market as they are seen as the best proxy for quality as they are in the developed world," says Peter Kirkman, manager of the JPM Global Consumer Trends fund. "Investors can tap into the emerging market healthcare boom by investing in western pharmaceutical brands which are active in emerging markets. Stocks such as GlaxoSmithKline, for example, have high emerging market exposure with 16 per cent of their total sales for the first nine months of 2010 coming from the region."
There are a number of sector specific funds offering exposure to healthcare, including Axa Framlington Biotech, Axa Framlington Health and Franklin Templeton Biotechnology. There are also four investment trusts: Biotech Growth Trust, International Biotechnology,Polar Global Healthcare Growth & Income and Worldwide Health Care. Passive funds which track an index include db x-trackers MSCI Health Care TRN Index ETF and db x-trackers STOXX 600 Health Care ETF.
However investment advisers generally suggest that sector specific funds should not account for more than 5 per cent of your portfolio, as their concentrated focus makes them higher risk. Another way to get some exposure to healthcare stocks is via UK equity income funds, notable examples including Invesco Perpetual Income and High Income, and Edinburgh Investment Trustrun by Neil Woodford.
Health-related investment trusts
|Investment Trust||1 yr NAV performance (%)||Discount to NAV (%)||Total expense ratio (%)|
|Polar Global Healthcare Growth & Income||NA||1.33||NA|
|Worldwide Health Care||17.77||8.4||1.15|
Source: Investors Chronicle as at 4 January 2010