Investors are piling into healthcare exchange traded funds as they look to take a long term view in a market that has strong growth potential and limited downside risk.
Assets under management in U.S. based healthcare services ETFs has now hit $1 billion and is likely to continue growing.
According to a report from Markit, so far this year, investors have favoured the devices part of the healthcare services sector, with the iShares U.S. Medical Devices ETF topping the inflow chart with $236 million of new assets. The second largest fund in the sector, the U.S. Health Care Providers ETF also from iShares, has seen strong inflows with $34 million of new assets.
Simon Colvin, an analyst at Markit, told ETF.com: "This is a long term cyclical trend and ETFs can access this. In the U.S. the costs of healthcare have soared, there is an ageing population, and greater demand for healthcare.
"There is growth potential here and there is also a defensive angle as well (limiting downside risk) because most of the sector is government funded, so any risk of trimming has heavy political costs," he said.
Healthcare is also proving a popular trend in Europe as well with the 21 listed healthcare ETFs seeing strong inflows since the start of the year.
Colving said: "These funds which invest in both pharmaceuticals and services firms now have over $1.6 billion of AUM after seeing $137 million of inflows since the start of the year. The largest fund is the iShares Europe 600 Health Care UCIT which has just over $360 million of AUM."
The healthcare services sector, which is a subset of the healthcare market, includes companies that run hospitals and not drug companies.
Over the last four years Markit have performed a survey asking 800 healthcare firms about their growth. They have grown for every month, bar two, over the last four years.