The Global X Longevity Thematic ETF (Nasdaq: LNGR) is up nearly 11% year-to-date, or more than double the returns offered by traditional health care ETFs. This result confirms that adding a demographic emphasis to healthcare investments can be a winning strategy.
LNGR tracks the Indxx Global Longevity Thematic Index. The ETF “seeks to invest in companies positioned to serve the world’s growing senior population through exposure to health care, pharmaceuticals, senior living facilities and other sectors that contribute to increasing lifespans and extending quality of life in advanced age,” according to Global X.
Not Another Run-Of-The-Mill Health Care ETF
As LNGR’s performance implies, the Global X fund is not a run-of-the-mill health care ETF. The Global X fund devotes just 12.18% of its weight to pharmaceuticals stocks and features more a growth tilt by allocating two-thirds of its weight to medical equipment makers and biotech companies. Data points bolster the long-term case for LNGR.
As medical and pharmaceutical advancements prolong life expectancy, the aging population is expected to create increased demand for the long-term care industry. In 2050, the population age 65 and over in the U.S. is expected to be 83.7 million, or almost double its estimated population of 43.1 million in 2012.
Industry observers argue medical technology companies can tap into increased health care spending among emerging economies, while the U.S. market has matured, and could experience slower growth. Looking ahead, in the years through 2024, spending growth is projected to average 5.8% and peak at 6.3% in 2020.
LNGR also devotes about 10% of its weight to health care real estate investment trusts (REITs), one of the fastest-growing real estate segments.
“Health care REITs own and manage a variety of health care-related real estate and collect rent from tenants,” according to Nareit. “Health care REITs’ property types include senior living facilities, hospitals, medical office buildings, and skilled nursing facilities.”
While health care is often viewed as a defensive sector suitable for conservative investors, the industry is shifting. It features myriad growth opportunities, many of which are not adequately reflected by some traditional healthcare funds. LNGR can be a complement to standard health care ETFs and help tactical investors tap into some of the growth-ier corners of this important sector.
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