Healthcare Sector Investment Sees Strong Rebound Post-COVID

While there are significant fears around interest rates and inflation, 67% of respondents to a new survey said they haven't let those concerns affect their portfolios.

Healthcare operating pools are rebounding strongly as the nation emerges from the coronavirus pandemic, with a big focus on environmental, social, and governance (ESG) investing, a new survey shows.

The NEPC annual Healthcare Operating Funds survey examined how healthcare operating pools are invested and found that 72% of respondents said that ESG is "somewhat important or very important." Larger healthcare systems prioritized ESG more than smaller systems.

Additionally, the survey found that while there are significant fears around interest rates and inflation, with 63% of respondents expecting higher interest rates by the end of 2021, 67% said they had not let inflation concerns result in portfolio changes.

Nearly one-third (29%) of respondents said that they may create formal diversity, equity, and inclusion (DEI) goals for their portfolios.

Additionally, the survey found that:

• While a 2020 NEPC survey found that 61% of healthcare organizations furloughed staff, with 43% suspending or postponing retirement plan contributions, the 2021 survey found only 9% of respondents plan to keep those measures in place.
• Three-quarters (76%) of respondents believe the S&P 500 will deliver returns of at least 6% this year, following 2020's "robust market returns."
• Nearly half (46%) of respondents plan to increase allocations, due to an optimistic view on private markets, while only 3% are planning to decrease allocations.

The online survey gathered data from 81 participating healthcare funds who represent 75 organizations with an assets under management (AUM) ranging from $250 million to more than $2 billion.