HSBC ASSET MANAGEMENT: GLOBAL EQUITY SUSTAINABLE HEALTHCARE FUND

In an era of tight healthcare budgets and increasing demand for care, basic social needs become increasingly inaccessible to a large part of the population. With the global trend towards sustainability, the need to create a sustainable healthcare system becomes evermore pressing.

LFF sat down with Nathalie Flury, Co-Head of Sustainable Healthcare Equities at HSBC Asset Management, to learn more about their Luxembourg-based Global Equity Sustainable Healthcare Fund. The bank’s first healthcare fund focused on sustainability and impact.

Twenty years ago, HSBC Asset Management launched its first Socially Responsible Fund, and since 2010 ESG considerations have been systematically integrated into their Equity, Fixed Income and Multi-Asset offerings. Today, their proprietary ESG database covers more than 17000 financial instruments. In healthcare, the company’s sustainability goals are focused on lowering treatment costs and providing access to new products, services and medicine to a greater number of individuals worldwide.

Your fund follows a thematic equity approach, investing in the health sector. Why the focus on this sector, specifically?

Nathalie:

The healthcare sector has two key advantages: It has a defensive component, which results from the fact that chronically ill patients, for example, have to take their medication on an ongoing basis, this ensures consistent revenues that are not dependent on economic cycles.

Secondly, the healthcare industry is well diversified and comprises very different subsectors with different characteristics. They range from classic pharmaceutical giants and biotech companies researching the development of new drugs to medical technology, laboratory technology, digitalisation, hospital operators and pharmacies.

All these companies also benefit from the megatrend of demographics. The bottom line is that the prospects for consistent growth are very good with growth in this segment expected to average 7% over the next five to seven years.

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Initially, when looking into the healthcare sector we noticed that a key issue relates to skyrocketing costs and availability of treatments in almost all countries.

When people consider investing sustainably, most focus on the environmental factor. Your fund is more focused on the social part. So, what makes the fund sustainable?

Nathalie:

Initially, when looking into the healthcare sector we noticed that a key issue relates to skyrocketing costs and availability of treatments in almost all countries. Therefore, when setting up the fund, we decided to invest into companies that are producing or providing innovative healthcare solutions, products, therapies or services.

These companies are then able to bring these new innovations to the market more effectively and thereby the fund improves healthcare by making it more cost effective and accessible to everyone. In this manner the fund is fully aligned to UN SDG goal 3 – making good heath and well-being achievable for all.

 

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In order to be able to make the best investment decision from a health economic point of view, we have basically built our own data bank over the last three years, which is proprietary to us and which we use to screen companies.

So, other than cost reductions, what are some of the underlying challenges and opportunities to be found in sustainable healthcare?

Nathalie:

One of the main key challenges in sustainable healthcare is digitalisation, but at the same time, it also creates opportunities. There is a significant potential for this industry to optimise: patient records within the hospital, or the billing or insurance process, and interactions with patients. However, this has yet to truly occur on a large scale.

Another challenge is the fact that not all the prescribed medicine are taken by the patients – there are statistics showing that up to 50% of all medicines are not taken or not correctly taken by patients.

In order to be able to make the best investment decision from a health economic point of view, we have basically built our own data bank over the last three years, which is proprietary to us and which we use to screen companies.

What specific sort of companies are you investing in and why are these companies geared towards sustainability?

Nathalie:

On one hand, we are interested in innovative healthcare solutions, products, therapies and services. But at the same time, we are looking for companies where management have proved they are able to reduce costs, not only operational but for the patients as well.

We are searching for companies that provide this, and what you see is that more and more, the innovative companies are in the mid cap range. Their management understands the need to follow-up clinical trials so that they have the available data.

An example in relation to diabetics. A large problem that these individuals face, is that over time, they are more likely to develop secondary complications or diseases.

Now, there are two companies that have brought small insulin pumps to the market. These are also usually combined with a continuous glucose monitoring device.

The data that these mini-pump companies have shows over time, patients have developed less secondary medical conditions. So, the patient is better off, and the insurer is going to pay less; reducing overall costs for individuals and companies as well as providing better access to new medical innovations to individual across the globe.

Why did you chose Luxembourg as the location to set-up and domicile the fund?

Nathalie:

Luxembourg was actually a natural choice for us. It is the leading fund domicile of selection in Europe, with access to a large and established network for cross-border distribution. The reputation of Luxembourg funds is well known and generally accepted throughout the global investor community, as well as with nearly every financial counterpart. On top of that, we are already familiar with the ecosystem in place as Luxembourg has been a choice for HSBC for a number of other funds.

How do you see the sustainable investment universe, specifically in terms of healthcare, evolving over the coming years? Are there specific trends that you see on the horizon?

Nathalie:

A great deal is happening in medical technology, for example, in the field of monitoring. Digitisation is also a core topic. For example, there are increasingly better offerings in the field of telemedicine or product solutions that help to optimise medical treatments.

In addition, there are also very fascinating advances in medical research, but these therapeutic approaches are sometimes accompanied by horrendous costs. While these may be impressive from a medical point of view, it does not stop us from looking at the cost side as well. After all, we firmly believe that UN SDG 3 – Good health and well-being – can be achieved primarily through non-cost-driving innovation in healthcare. And this can be done without investors having to compromise on returns.