Healthcare/Biotechnology Sector Funds Attract Investors

Healthcare/biotechnology sector funds (including both mutual funds and ETFs) took in over $828 million of net new money for Thomson Reuters Lipper’s fund-flows week ended Wednesday, May 16, 2018. It was the group’s eleventh largest weekly net inflows ever and its largest since the fund-flows week ended June 28, 2017, when it had net inflows of $1.6 billion. Prior to this past week the healthcare peer group was in a fund-flows slump that had seen seven straight monthly net outflows for total net-negative flows of $7.6 billion, which represented a loss of 12.2% of the group’s total assets under management. It bears watching whether this recent positive change in investor sentiment sticks or whether flows revert back to bearish.

The bullish sentiment toward the healthcare/biotechnology sector appears to have been initiated by a speech given by President Donald Trump on Friday, May 11. In the speech Trump announced the launch of several new policies aimed at reducing the overall cost of pharmaceuticals and the out-of-pocket costs for prescriptions, taken by the markets as a positive for the healthcare/biotechnology sector. A factor in whether the healthcare/biotechnology sector funds continue to attract net new money could be whether these new policies prove effective in reducing the cost of prescription medicine.

ETFs were responsible for all of the net inflows (+$841 million) for the peer group this past week. Flows were heavily concentrated, with three ETF products accounting for almost 90% of the total positive flows for the group: SPDR S&P Biotech ETF (XBI, +$342 million), Healthcare Select SPDR ETF (XLV, +$216 million), and iShares U.S. Medical Devices ETF (IHI, +$187 million).