Investing sustainably in health care shares with health care equity funds
A number of major trends are driving increasing demand for health care services and products over the long term. One is demographic change. The older people become, the longer and more intensively they make use of health care services. Another is the fact that large portions of the world’s population still have no or only very limited access to health care services. This means that there is great convergence potential here especially in many emerging countries. The health care industry also profits from a high level of public funding.
The megatrend of good health
Investments in the good health of the population, in clean water, clean air, etc. always pay off in the long run. Good health and well-being is also one of the 17 UN Sustainable Development Goals (SDG*) and was formulated as follows: “Sustainable Development Goal 3 (SDG 3): Ensure healthy lives and promote well-being for all at all ages.”
Another aspect makes investments in health care very interesting: a high degree of innovation and technological advances, for example in the development of medications, diagnostics, medical equipment, and telemedicine and remote surgical procedures.
Technological innovations are key drivers. And artificial intelligence can accelerate this even further by allowing medications to be developed much more rapidly and with significantly higher probabilities of success than ever before. It may soon be possible to treat cancer with never-before-seen success rates, and we may even be able to at least slow ageing. To put it succinctly, fascinating medical solutions and breakthroughs are clearly visible on the horizon.
What to consider with health care investments
The media and investors generally focus on biotechnology and pharmaceutical companies, which can see steep increases in their share prices when effective new medications are developed. But there are many failures for every successfully developed drug. This means that shares in this industry can also suffer significant value declines.
It takes a great deal of expertise and some luck to recognise in good time who will be successful with new medications and who will not. This is why pharmaceuticals are an element of, but not the only element of a good health care equity fund. In addition to the selection of companies, a good combination of different subsectors is a key success factor.
Raiffeisen-Health and Wellbeing-ESG-Aktien
A good mix reduces the extent of fluctuations in the fund portfolio by spreading the investments among different business models, areas of activity, and thus also revenue sources (though fluctuations cannot be avoided entirely). At the same time, the fund taps into earnings potential from numerous different trends in the field of health care. Alongside pharmaceutical shares, Raiffeisen-Health and Wellbeing-ESG-Aktien primarily invests in stocks in the following areas:
Medical technology and equipment,
Biotechnology,
Life science and diagnosis,
Health insurance, and
Health care accessories.
And, unlike many other health care funds, it also includes companies from the well-being industry. Not just maintaining health, but also mental and physical well-being are also important well into advanced age – and the two goals are often closely linked.
Pharmaceutical names like Eli Lilly and Novo Nordisk currently a strong focus
The largest individual positions in Raiffeisen-Health and Wellbeing-ESG-Aktien currently include Eli Lilly and Novo Nordisk, two pharmaceutical companies that have generated a great deal of interest among the media and investors especially due to new medications against obesity. But in addition to this, the focus in drug development and the fund management has long been effective treatment options for rare but serious diseases. The company that is first to find solutions here can often secure small but usually very lucrative markets for a longer period of time because it is often not worth it for competitors to enter the market after this, even if they are also successful. Approval processes are also often shorter and simpler here.
Sustainability is not a matter of course in the health care sector
The health care sector could be a textbook example of sustainability. After all, it contributes to improving people’s life expectancy and quality of life like hardly any other field. On the other hand, it was not exactly a pioneer in sustainability in the past. Controversial animal testing, excessive lobbying, conflicts of interest, corruption, and inflated medication prices are just some of the issues that contribute to the rather poor opinion that many people have of the pharmaceutical industry, for example. The working conditions and pay in nursing professions have also long been the object of criticism. But it is possible and also very important to apply pressure towards sustainability when making investments in the health care sector.
Award-winning sustainability concept
Because of this, Raiffeisen-Health and Wellbeing-ESG-Aktien applies positive criteria that a company must meet to be eligible for the portfolio. And there are criteria that disqualify a company from the start. Examples of this include genetically modified food and seed, child labour, inhumane working conditions, and illegal or excessive animal testing. In selecting its target companies, the fund applies the long proven sustainability investment process of Raiffeisen KAG. A system that has been praised by and won awards from independent third parties time and time again. At the coveted FNG Seal awards of Forum Nachhaltige Geldanlagen in Berlin at the end of 2023, for example, Raiffeisen KAG captured the top score of three stars for 18 of its sustainability funds, more than any other fund company.
Conclusion
Health care and well-being equities are an exciting and promising investment topic, but of course also involve risk. Good diversification (companies, business fields, medical trends) and expert knowledge are prerequisites for long-term investment success here. A well managed investment fund is ideal for this. At the same time, a greater sense of responsibility and sustainability are sorely needed in this industry. Raiffeisen-Health and Wellbeing-ESG-Aktien is making a contribution to this and allows investors to invest sustainably in companies in the health care and well-being segments. Investments in this equity fund are naturally also subject to the risks that are typical of equity markets such as elevated price volatility and the possibility of price declines and decreases in value.
* SDG: Sustainable Development Goals
The fund exhibits elevated volatility, meaning that unit prices can move significantly higher or lower in short periods of time, and it is not possible to rule out loss of capital.