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Research - DECEMBER 3, 2018

€177b to be invested into healthcare over the next five years

by Marek Handzel

$200 billion (€177 billion) will be invested into healthcare assets around the globe over the next five years as the number of people aged 60 and over rises from 962 million to 2.1 billion by 2050, according to a new report published by Octopus Group.

The U.K.-based investment firm has also found that institutional investors already invested in healthcare real estate plan to increase their allocations by more than half over the next five years, from 6.1 percent to 9.5 percent.

Europe is the primary focus for investment into healthcare assets. Of those surveyed who are yet to invest in the sector, more than seven in 10 are considering allocating funds to the United Kingdom, while an estimated 60 percent of global institutional investors already focus on the U.K. when looking at care homes and healthcare facilities. Another 45 percent of those already invested in the sector prioritize Germany and 39 percent choose to concentrate on France.

The survey, which is based on the opinions of 100 investors with $6.8 trillion (€6 trillion) of assets under management from the U.K., EMEA, Asia and Australia, reveals that seven in 10 investors who are invested in the healthcare sector say their investments are either performing as expected or overperforming. Almost 39 percent of those investors report an annualized net IRR of between 10 percent to 15 percent over the past five years. Strong returns are expected to continue, with Asian investors being the most bullish, expecting future returns to reach 13 percent on average.

According to the survey’s respondents, diversification is the prime driver for investors as the search for attractive risk-adjusted returns has taken on new urgency. The bull market looks to be running out of steam and political uncertainty is now a global concern, and healthcare infrastructure is attractive as it is sheltered from macroeconomic factors.

Benjamin Davis, CEO of Octopus Healthcare, says the healthcare sector is undergoing unprecedented change: “Not only is the ageing population growing, but the make-up of this group is changing beyond recognition. Improved quality of life in later years is transforming the way the over 60s live. This group is more active than ever before and has higher expectations than previous generations. Globally there is a significant lack of accommodation to cater to this varied group’s needs. This demographic shift is creating a strong investment opportunity for institutional investors.”

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