Learn how healthcare's non-cyclical drivers fuel stability and growth for investors
Wealth Professional, in a sponsored article by Harvest ETFs, explores how healthcare remains a stable and growth-oriented sector, driven by permanent non-cyclical forces such as aging populations, expanding markets, and technological innovation.
Paul MacDonald, chief investment officer at Harvest ETFs, emphasises the resilience and long-term potential of the healthcare sector, noting that these forces provide consistent demand regardless of economic cycles.
MacDonald points to demographic shifts in developed nations, where the 65+ age group is growing rapidly. This cohort, characterised by longer lifespans and chronic health conditions, drives increased spending on medical services, pharmaceuticals, and advanced treatments.
In developing markets, rising incomes elevate healthcare to a critical priority. MacDonald explains that once basic needs like food, water, and shelter are met, healthcare becomes the next focus, creating opportunities for investment in emerging economies.
Technological innovation stands out as a dynamic driver reshaping the healthcare sector.
Advancements such as robotic-assisted surgeries and breakthrough drugs like Ozempic, Wegovy, and Mounjaro are transforming patient outcomes and addressing a global obesity epidemic, with over 500 million adults affected.
MacDonald compares these innovations to the tech sector’s growth catalysts, noting that healthcare earnings growth is reaccelerating. He expresses optimism about the sector’s potential leading into 2025.
Harvest ETFs’ flagship fund, the Healthcare Leaders Income ETF (HHL-T), focuses on diversification and active income strategies. Its portfolio includes 20 carefully selected holdings prioritising market leadership, innovation, and financial health.
The fund uses a covered call approach to enhance monthly distributions while managing risk, generating over $500m in payouts over the past decade. MacDonald highlights the fund’s disciplined management, which balances income and growth even during volatile markets.
For investors seeking higher income and growth, the Harvest Healthcare Leaders Enhanced Income ETF (HHLE-T) applies modest leverage, offering a yield of 11.03 percent as of November 2024.
The fund has delivered annualised growth of 11.58 percent year-to-date and 26.73 percent over the past year.
MacDonald acknowledges risks within the sector, such as patent cliffs, where major drugs lose exclusivity.
To address this, Harvest focuses on diversification and selecting companies with strong research pipelines.
He notes that political risks, often a concern in healthcare, have been less prominent recently, with policies like the Inflation Reduction Act already in place and minimal new regulatory developments.
The healthcare sector remains a unique combination of stability and dynamism, offering opportunities for both income-focused and growth-oriented investors.
MacDonald highlights the enduring relevance of healthcare, stating that ten years of distributions and strong performance demonstrate Harvest ETFs’ commitment to long-term sustainability.
With innovations like AI-powered diagnostics and robotic surgeries on the horizon, the sector continues to evolve and promise new possibilities for patient care and investment.
