Investors Buying Into Healthcare ETFs On The Back Of Drug Development

Investors are increasingly putting their money into ETFs that are focused on healthcare. The rate at which money is going into these types of funds is faster than it has been in the past six years. Industry experts believe that the boom is due to pharmaceutical and biotech companies developing new drug products and treatments for cancer and other diseases which health consumers are expected to use in large numbers. So far in 2014, over half of all cash going into US sector ETFs was for funds focused on healthcare.

Doug Foreman, chief investment officer at Kayne Anders at Rudnick Investment Management, believes that investors will continue to put money into the healthcare and pharmaceutical industries. “People thought drug development was dead and all there was was a patent cliff,” said Foreman. “There isn’t a day that goes by that some company doesn’t report positive results from a trial and the stock is up 100%.”

After the Affordable Care Act was signed into law in 2010, there was fear amongst investors about the future of the health industry and drug development by pharmaceutical companies. Following the signing of the law, $944.9 million was taken out of healthcare related ETF funds. Les Funtleyder, who works as a healthcare investor and industry analyst, believes that the Affordable Care Act is no longer having an adverse effect on investments. “The ACA has kind of come and gone,” Funtleyder said. “It’s been implemented and nothing bad has happened to the companies by and large.”