Sponsored by Bellevue Asset Management
As the global population ages and demand for medical services rises, healthcare is one of the few industries where growth is virtually assured. This makes it a vital area of focus not only for governments and societies, but for investors as well.
Bellevue Asset Management, a specialist in healthcare investments, recognises that inexorable demographic trends are driving this ever-increasing demand, and thus funding and delivering these services presents huge challenges — as well as tremendous opportunity for both society and investors.
Healthcare must inevitably undertake a productivity revolution that should both improve outcomes and reduce inefficiencies and deliver a service fit for purpose in the 21st century. For investors, this offers the opportunity to support the deployment of the solutions that will shape its future.
Demographics lies at the heart of the challenge: our bodies wear out as they age. Thus, the burden of chronic disease falls mainly on the elderly, who also tend to be the least economically productive. According to the World Health Organisation, by 2050 the global population over the age of 60 will have doubled (to 2.1 billion), and the number of people aged 80 years or older will have tripled to reach 426 million.
So, whilst growing demand for healthcare services feels inevitable —the big question is how can these services be funded and delivered in a scalable and sustainable manner? Traditional approaches are already failing us practically and financially, yet the ageing trend is only getting started.
As one of the most experienced healthcare investors in Europe, Bellevue has identified a number of compelling thematics that lie at the centre of reshaping healthcare delivery.
“With an ageing population, the burden of managing chronic conditions is a major issue,” says Paul Major, Lead Portfolio Manager at Bellevue, “particularly cardiometabolic and neurodegenerative diseases. Governments must act now to create the capacity to meet this challenge, and simultaneously shift toward a preventive approach to limit the ultimate burden on patients and society.”
A wake-up call for healthcare funding
For health services in advanced economies, the issue is managing increasing demand efficiently. Despite being ‘hi-tech’, the waste within healthcare sector is staggering: it’s estimated that one in every four dollars spent is wasted. This stems from a variety of inefficiencies, including unnecessary treatments, administrative overheads and outdated processes.
The NHS, heralded (by itself) as a model of public healthcare, is grappling with inefficiencies that are having a major impact on healthcare delivery. One in four interactions with caregivers are deemed medically unnecessary after they have taken place. A 2019 report found that administrative inefficiencies alone cost the NHS an estimated £4.5 billion annually, while over 15 per cent of hospital beds are occupied by patients who no longer require hospital care.
Worse, the UK ranks 24th out of 41 OECD countries in terms of life expectancy, despite higher-than-average healthcare spending. The NHS also experiences longer waiting times, with recent data showing an average wait of 14 weeks for elective care, compared to just 7 weeks in countries like the Netherlands or Germany. In the face of such data, one must wonder why any discussion around reforming the service tends to descend into controversy.
The productivity revolution in healthcare
Despite sobering statistics, the outlook for healthcare remains bright. The tools, products and services to drive a transformation in productivity are already within reach. From cutting-edge digital solutions in disease management, to groundbreaking advancements in drugs, devices and diagnostics, the healthcare industry is primed for a revolution. New approaches offer the potential not only to streamline operations and reduce inefficiencies but also to dramatically improve patient outcomes, making healthcare systems more resilient, efficient, and sustainable.
Now is the time to leverage these innovations to reshape the future of healthcare.
“We believe that the tools, products and services to deliver a transformation in the healthcare delivery paradigm are available and we are already seeing benefits in various markets from their utilisation,” says Paul. “To our minds, the limiting factor in the speed of this transformation is more political/legislative than practical. As the pandemic demonstrated, change can happen quickly when resources are marshalled.”
Digital tools such as telemedicine, AI-driven diagnostics, and wearable health devices are making it possible to monitor patients remotely, predict and prevent health issues, and reduce the need for costly in-person visits. For investors, this is an unparalleled opportunity. The inefficiencies currently plaguing healthcare systems present fertile ground for disruption, and the companies providing solutions to these problems stand to benefit enormously.
So, who are the leaders behind these changes?
“Stock markets are often a temporal mirror; the largest or most valuable companies tend to be those who have dominated historically (e.g. Aramco) or those whose critical role in the next wave of societal change is widely viewed as inevitable (e.g. Nvidia today). As such, many investors conflate “healthcare” with traditional mega-cap drug companies that are household names,” explains Paul.
“However, the sector encompasses a much broader range of investment opportunities beyond these behemoths. Our focus lies in identifying and supporting the companies that are really driving game-changing innovations. The next wave of healthcare innovations are just as likely to come from a suite of companies that are off the radar of most generalist investors.”
Bellevue’s approach, which combines rigorous bottom-up stock selection with a top-down thematic overlay, allows the firm to identify the companies leading this revolution in healthcare. Their strategy focuses on investing in the right sectors and regions that will benefit from the demographic trends driving healthcare demand.
As a society, the UK must have an honest conversation about healthcare priorities and how it plans to fund and resource these services in the future. By strategically supporting advancements in digital health, diagnostics and therapeutics, investors can not only contribute to a more resilient healthcare system but also capitalise on the growth potential within this dynamic sector.
For more information, visit www.bellevue-am.uk/
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