Sovereign Fund Direct Investing in Healthcare Remains Constant

Healthcare is a popular investment theme for sovereign wealth funds as the world’s population is getting older and older each year. Strategically, Asian sovereign funds like the Korea Investment Corporation (KIC) and Singapore’s GIC Private Limited have a domestic population that has a low birth rate and aging demographic. Combining the aging trend with the frenetic pace of industry consolidation, such as the New York-based Pfizer and Allergan US$ 150 billion merger, health care remains attractive, yet complicated, for many institutional investors. Being somewhat economic recession resistant when it comes to developed markets, healthcare has attracted substantial inflows of sovereign wealth fund capital. For example, Khazanah Nasional owns a minority stake in Mumbai-based drug manufacturer Ipca Laboratories. Wealth funds also approach private healthcare-related companies. Khazanah Nasional, Temasek Holdings, GIC and Baring Private Equity Asia are in negotiations with private equity firm CX Partners to buy a stake in Bengaluru-based surgical equipment maker Sutures India Pvt. Ltd. Sutures India has an estimated enterprise value of US$ 300 million with backers such as CX Partners and TPG Capital.

The Singaporean sovereign funds such as GIC and Temasek Holdings are active in the drug industry, backing emerging Chinese and Indian pharmaceutical companies in 2014 and 2015.

According to the Sovereign Wealth Fund Transaction Database (SWFTD), the pace of direct sovereign wealth fund investing in the healthcare sector has been steadily increasing. In the last three quarters starting with June 30, 2015, wealth funds spent more than US$ 1 billion directly investing in healthcare – roughly US$ 3.2 billion. This can be compared to volatile flow amounts in 2013 and 2014.

Direct Investment by Sovereign Wealth Funds and Large Pensions in Healthcare

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