Institutional investors and hedge funds have shifted away from technology names as the U.S.-China trade war extends and picked up battered healthcare names. Retail investors can also gain exposure to the broad healthcare through sector-specific exchange traded funds.
According to Goldman Sachs, hedge funds are bottom fishing in healthcare, with healthcare names now accounting for the biggest sector exposure for hedge funds at 18% by the end of the second quarter, CNBC reports.
“Funds took the policy-driven decline of Health Care stocks in 1H as an opportunity to lift the sector to the largest net overweight vs. the Russell 3000,” Goldman strategist Ben Snider said in a note. “Funds trimmed positions in semiconductors and other stocks exposed to US-China trade conflict.”
Healthcare was under pressure earlier this year after political risks associated with Medicare for All gained traction.
Hedge funds are “largely ignoring the risk of health care regulation that garnered investor attention early this year,” Snider added. “Funds increased tilts toward Pharmaceutical and Managed Care stocks, the industries most exposed to policy risk.”
Hot Health Care ETF Plays
On the other hand, hedge funds cut back on information technology, which is now the most underweight sector for hedge funds, as they reduce exposure to companies with revenues in China, chip stocks and U.S.-listed China internet names.
ETF investors can gain exposure to health care sector through broad sector-related ETFs like the Health Care Select Sector SPDR ETF (NYSEArca: XLV), Vanguard Health Care ETF (NYSEArca: VHT) and iShares US Healthcare ETF (NYSEArca: IYH).
Investors can also take on more focused healthcare exposure through pharmaceutical-related ETFs, such as Invesco Dynamic Pharmaceuticals Portfolio (NYSEArca: PJP), SPDR Pharmaceuticals ETF (NYSEArca: XPH), iShares U.S. Pharmaceuticals ETF (NYSEArca: IHE), VanEck Vectors Pharmaceutical ETF (NYSEArca: PPH) and VanEck Vectors Generic Drugs ETF (NasdaqGM: GNRX).
For more information on the healthcare sector, visit our healthcare category.