The healthcare sector has had major developments with accelerating trends towards automation, digitisation and robotics. Wellington Management believes there are several exciting innovations and trends that could bolster investments in healthcare over the long term.

The investment management firm says that the healthcare sector includes a range of other categories, as well as subsectors. “Health care is a broad, diverse industry with defensive and offensive capabilities. In our view, this diversity of companies, products, and services within health care is part of what has made the sector such a strong performer in the past and why we’re so optimistic about the future,” writes Jean Hynes, CEO of Wellington Management.

Talking about investments in healthcare, Wellington says that the level of innovation happening in the sector has been proficient. Smarter drug discovery and development have boosted the industry output. Shortening of early development timelines in the drug industry has come to fruition, thanks to tools like machine learning and structural biology. Better industry participant decision-making has boosted clinical development as well. New platforms such as genetic medicine have enabled more effective drug development, opening the door to a lot more possibilities.

Meanwhile, the managed care subsector has been resilient throughout the Covid-19 pandemic, whereas hospitals, dialysis companies and other facilities were severely affected. Life science tools companies performed well, while medical devices struggled at the beginning. Therefore, the pandemic impacted certain parts of the sector differently than others.

Wellington Management notes that we are currently in the process of finding a new way of paying for healthcare services. “As it stands today, our fee-for-service system incentivizes people to do more, not better. While this has been a known issue for quite some time, in our view, it hasn’t been until recently, with advancements in technology, that we’re seeing successful attempts to remedy this system,” per Hynes.

“The concurrent trends of groundbreaking innovation, pandemic recovery, and technological advancements come together to create a strong, long-term case for health care investment. This, coupled with the fact that the asset class has historically generated strong returns, gives us reason to believe that the health care sector is well-positioned in the years to come,” concludes Wellington.

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