The Healthcare Sector: Private Equity’s Unique Advantage
A surprising trend has emerged during the past month among private equity investors. From funds of funds to family offices and pension plans, there is a strong interest in private equity funds that are focused on health care.
Nearly 18 percent of all active private equity fund investors that were reached during the month of June indicated an interest in healthcare focused funds. It is important to note that while some of these mandates were interested in specific sectors, such medical devices or biotech, the vast majority stressed the diversity that a general healthcare-focused fund could provide.
An investment analyst at a U.S.-based fund of private equity funds expressly stated that his firm did not want specialist healthcare funds; they would be too focused. Instead the firm felt that by investing in private equity funds that took a holistic view of the entire sector, it would be able to generate stable and diversified returns.
The healthcare sector offers a tremendous variety of opportunities with potentially explosive growth, but investments are often long term and effective investing requires significant expertise and research. Private equity funds, with their long-term investment outlooks and ability to employ experts in specialized fields, are uniquely positioned to generate significant returns from the healthcare sector.
Brighton House will continue to follow this trend and track how it develops over Q3. If the recent data is any indication, private equity fund investors are going to continue to look to healthcare-focused funds to generate uncorrelated and significant returns over the long term.