M&A Activity Stokes Inflows to Healthcare Providers ETFs

Buoyed by rumors that the health insurance industry is poised for consolidation on a grand scale, the iShares U.S. Healthcare Providers ETF (NYSEArca: IHF) has been steadily rising and raking in new assets.

As of June 23, IHF added $247 million in new assets this year, the ETF’s biggest first-half inflows since it came to market in 2006, reports Joseph Ciolli for Bloomberg. Up 19.4% year-to-date, is now home to $987.4 million in assets under management.

For weeks, investors and the financial media have been expecting a wave of consolidation that could see marriages among some of IHF’s largest holdings. Earlier this week, Cigna (NYSE: CI) rejected a $47 billion takeover offer from Anthem (NYSE: ANTM). Anthem and Cigna are IHF’s fourth- and fifth-largest holdings, respectively, combining for over 13% of the ETF’s weight. [More M&A Coming for This Healthcare ETF]

Dow component UnitedHealth (NYSE: UNH) has made overtures for rival Aetna (NYSE: AET) while Aetna has been reportedly eying Humana (NYSE: HUM), according to the Wall Street Journal. UnitedHealth, Aetna and Humana combine for about 23% of IHF’s weight.

“Fueling the potential consolidation is the Obama administration’s 2010 health law, which put tougher rules on the industry, demanding more covered services, better care and a ceiling on profits. Companies are racing to capture the more than 20 million customers who will buy coverage under the law,” according to Bloomberg.

Inflows to IHF are accelerating, including $138.1 million in the current quarter. In March 2014, the ETF had just $400 million in assets under management. Investors are also taking note of IHF’s equal-weight rival, the SPDR S&P Health Care Services ETF (NYSEArca: XHS).