As the entire human race has come to learn over the past few months, COVID-19 has changed the way our society and the global economy will likely function for some time. This pandemic’s impact has negatively affected several major sectors, and the share prices of companies in those sectors in many cases have already fallen below levels last seen over a decade ago.
The internet and airways are flooded with news about record unemployment, as well as how companies’ operations and earnings are being severely damaged as a result of COVID-19. This has led many of us to lose hope that there are no sectors performing well during this pandemic. But this lost hope is unfounded.
In fact, there is one industry in particular that has been posting positive returns and generating a lot of buzz as a result of a universal need for the human species to beat back the mortal threat of this novel coronavirus. That is the healthcare sector.
Why technology and healthcare? Why now?
As more money is funnelled into developing innovations in the global healthcare industry, new medicines and technologies are constantly being introduced to prolong lifespans and improve the health of our species. By 2022, it is predicted that healthcare spending globally will amount to just over US$10 trillion. There are a number of reasons vast amounts of funds have been poured into healthcare spending. One of the primary reasons for this is an aging population around the world, which will likely result in increased healthcare spending to help meet all the medical needs of this fast-growing demographic. As our world continues to embrace technology, the demand for technological advances within the healthcare industry has also grown to ensure the comfort and well-being of the elderly.
While the secular trend in healthcare has been focused on the elderly, mitigating the impact of COVID-19 has been at the top of most people’s priorities thus far in 2020. The healthcare industry is focused on helping to cure the affected, to protect our caregivers and, ultimately, to find a vaccine for this virus that has already sickened and killed so many people. COVID-19 has put many of the top healthcare companies to the test, as people are increasingly demanding a solution to this pandemic.
With the recent focus on the healthcare industry working to protect us all from harm, both today and in the future, it has become increasingly evident why this sector has been a bright spot in these uncertain times. One of the best ways to access this dynamic sector is through an exchange-traded fund (“ETF”) that provides investors with a broad range of the healthcare sector’s leading names from around the world. Considering there’s no one healthcare company that is a clear frontrunner in the race to ultimately find a vaccine for COVID-19 as of yet, it may be wise to consider a diversified approach that provides access to a wide-range of the world’s leading healthcare companies.
LIFE ETF: Investing in the Future of Healthcare
Evolve Global Healthcare Enhanced Yield Fund (TSX Ticker: LIFE), LIFE ETF, is an exchange-traded fund that invests in 20 of the largest global healthcare companies with an average market capitalization of US$209 billion*. LIFE provides investors with a healthy 7% distribution yield along with one of the lowest management fees in its category.
The healthcare sector has performed well throughout the past three global recessions as a result of the constant demand for medical goods and technology, even during economic downturns. Given that experts are saying we are about to enter another recessionary environment, investing in a more recession-resilient sector like healthcare may be one of the better choices for investors.
With a higher demand and focus on healthcare companies to produce more testing kits and ventilators, as well as a massive emphasis on these companies to find an effective treatment and vaccine to stop the spread of COVID-19, the healthcare industry is likely to remain in the spotlight in the immediate future and beyond. Many of the major healthcare companies working on vaccines for COVID-19 are included in LIFE’s portfolio of holdings. In total, 11 of the Fund’s holdings in LIFE are working on vaccines and/or treatments for COVID-19. Considering no one can predict which company will ultimately be the first to develop a working vaccine/treatment for COVID-19, choosing to invest in a diverse exchange-traded fund (“ETF”) that provides access to some of the leading healthcare companies in the COVID-19 race may be an attractive opportunity from a risk-adjusted perspective.
How has LIFE ETF found success during COVID-19?
Wealth Professional recently published an article on how only five out of 581 TSX-listed ETFs stayed positive in March when the pandemic closed down much of the global economy. Evolve ETFs President and CEO, Raj Lala, explained how three of the five ETFs with positive performance belonged to Evolve. LIFE ETF, which had the highest return for an equity ETF on the on the S&P/TSX Composite Index, posted a total return of 2.99%. Mr. Lala explained that the healthcare sector is a “recession-proof industry.” The sector’s services are considered essential, and the healthcare sector will always be needed despite the global economic and geopolitical climate. LIFE ETF’s positive return in March is just one more illustration of how the healthcare sector tends to strive despite the challenges of economic downturns.
During these unprecedented times, healthcare isn’t just viewed as an investment opportunity, it is also looked upon as the antidote to help us out of this pandemic.
*As at March 31, 2020.