Illustration: Chris Hernan
Five experts point out investment opportunities linked to improving physical and mental health.
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Money may not be able to buy you health, but you can definitely invest in it.
Major breakthroughs in the science of mental and physical wellness are revolutionizing how we think about our bodies and minds. To get a sense of the best investment opportunities, Bloomberg News spoke to five investment managers. Their suggestions range from weight-loss drugs and treatments for neurological disorders to AI-powered research and mental health apps.
Some of the ideas involve private companies that aren’t easily accessible to individual investors, so Andre Yap, an ETF researcher at Bloomberg Intelligence, offers exchange-traded funds, or ETFs, that can serve as a rough proxy.
Additionally, each expert listed their personal health recommendations – the things they do in their own lives to feel good and stay in shape. These answers included things like intermittent fasting, upper body strength training, and proper sleep hygiene.
Treatment of neurological disorders
vision:
We are at the beginning of the next wave of innovation in neurology. If you think about waves of innovation over the years, there are a few things that need to happen for a wave of innovation to work. The science needs to be advanced enough that we can develop treatments that address the underlying symptoms, and there needs to be an environment where insurers and individuals are willing to pay for that innovation. Our understanding of neurology has advanced dramatically for diseases like Parkinson’s and Alzheimer’s, but it’s still in its infancy, and that’s when you want to invest.
opportunity:
Companies like Biogen are great investments in neurology. They were one of the first to develop a drug for Alzheimer’s and have a large pipeline. They are developing Leqembi, a drug that slows cognitive decline in Alzheimer’s patients, as well as Parkinson’s and ALS drugs. If these drugs work and the science advances, they could very well be very important drugs, and there are no other drugs that can treat these neurological diseases. Biogen is ahead of its competitors and has first-mover advantage in many areas. They are also funding these drugs at a much higher level than their competitors, spending a lot of money on research and development. Currently, they have annual sales of just over $10 billion, but if an Alzheimer’s drug is developed, it could add another $7 billion in annual sales.
How to invest:
Andre Yap, an ETF researcher at Bloomberg Intelligence, writes that the Tema Neuroscience & Mental Health ETF (MNTL) and iShares Neuroscience & Healthcare ETF (IBRN), which have expense ratios of 0.75% and 0.47%, respectively, are options. But because their thematic nature makes them very niche, they also run a higher risk of being shut down if they can’t find enough customers. Investors concerned about these factors might look to ETFs like the iShares Biotechnology ETF (IBB) or the SPDR S&P Biotechnology ETF (XBI), which offer broader exposure to the biotech industry as a whole.
Mental Health Solutions
vision:
Our nation’s mental health crisis has made headlines with everything from anxiety and depression to eating disorders and substance abuse. Even now that the pandemic is over, downstream effects continue from a mental health perspective. This is exacerbated by the fact that there is a severe shortage of clinicians in the market. Utilization rates are up substantially because younger generations are more comfortable talking about mental health. This tsunami is really raising the risk on both the demand and supply side.
opportunity:
Many new digital health companies are providing ways for people to easily access services from the comfort of their own home. Some of the more interesting digital health companies include Spring Health and NOCD. Others, such as Centerstone, are focused on expanding the supply of clinicians. Centerstone has built its own education and training programs with the idea of helping train lower-level clinicians. Meanwhile, Modern Health also offers programs that leverage the broader supply of mental health professionals, recognizing that not everyone needs to see a provider with an MD or Ph.D., they can see an MSW or certified coach. Another interesting company is Brightline, which recently signed a contract with the state of California to provide pediatric health services. I think many of these companies will go public as they scale.
How to invest:
Products such as the Healthcare Select Sector SPDR Fund (XLV) and Invesco S&P Small Cap Healthcare ETF (PSCH) can give investors board exposure to large- or small-cap publicly traded companies operating in the healthcare sector for just 0.09% or 0.29%, respectively, BI’s Yap writes. Alternatively, investors with a greater risk tolerance might be better served by the BlackRock Future Health ETF (BMED), which seeks to invest in innovative and emerging companies in the healthcare sector. But if you’re looking to invest like a venture capitalist or private equity firm, the Invesco Global Listed Private Equity ETF (PSP) is an option. The fund invests in private equity and venture capital firms whose primary business activities are investing in, lending capital to, and providing services to, unlisted companies.
Weight loss drugs
vision:
For a long time, up until five years ago, most venture capital firms ignored the weight loss field. But the arrival of GLP-1 drugs changed everything. Now, everyone is looking at these treatments and looking for options with tolerable side effects, as many of them cause nausea and diarrhea. Also, when patients stop taking weight loss drugs, they tend to rebound, so people are thinking about how to stop taking them and keep the weight off.
opportunity:
As investors, we look for solutions that have the potential to be transformative. Every pharmaceutical company has a strategy for obesity, so it is saturated to some extent. Among big pharma companies, Novo Nordisk A/S and Eli Lilly & Co. are pioneers in this field and have expressed a desire to own this therapeutic category. We are invested in Glyscend, a biotech company developing a weight loss drug with a more tolerable profile, an oral medication that is likely to have fewer side effects. We are also invested in Endogenex, a company that is funding clinical research into a device-driven approach to metabolic disease, which targets metabolic pathways by applying non-thermal pulsed electric fields to tissue in the small intestine with the goal of improving metabolic function.
How to invest:
BI’s Yap writes that the Amplify Weight Loss Drug & Treatment ETF (THNR) and the Roundhill GLP-1 & Weight Loss ETF (OZEM) offer exactly the kind of exposure McWilliams described. THNR and OZEM offer shares in companies involved in developing drugs for weight loss and anti-obesity, with their largest holdings being Eli Lilly and Novo Nordisk.
Laboratory Space
vision:
A big advancement over the last 20 years has been really understanding the aging process, the changes in cells and the associated decline in bodily functions. Off the back of that, a whole industry of biohacking and DIY healthcare has risen and really taken off, with things like intermittent fasting and blood transfusions. Many of these methods have been shown to work in mice, but one of the big lessons from the research in this project is that treatments that work in mice don’t necessarily work in humans. There’s great promise in stem cell research and telomerase reactivation (turning back on the enzyme that promotes cell division), but there’s a gap between scientific discovery and mainstream delivery in terms of when people actually take up the treatments. This has implications for investment ideas.
opportunity:
When we think of life sciences, we of course think of biotechnology, but more research also means more labs are needed. Real estate investment trusts focused on life sciences are interesting. Companies that do research like to have their offices and labs next to each other. When it comes to REITs, this kind of real estate focus is a growing sector. A lot of this research is done in the US. There are a lot of billionaires who have everything except youth, and they’re happy to fund research activities.
How to invest:
There aren’t many REITs that specialize in this niche, but BI’s Yapp says the Global X SuperDividend REIT ETF (SRET), with its 0.59% expense ratio, could be a good way to implement Carrier’s strategy. The ETF offers good exposure to the healthcare industry, including medical research and medical office buildings, as five of its top 10 stocks have such exposure, making up 20% of the fund’s portfolio.
AI-based research
vision:
Artificial intelligence is changing the world, and the pace of this change is only accelerating. One area where AI is likely to have a major impact is the $12 trillion healthcare industry. Global healthcare systems are succumbing to pressures from demographic changes that are driving higher demand for healthcare and budgets struggling to keep up with requirements. We believe AI can play a key role in improving healthcare outcomes. AI is already helping speed up the drug discovery process by identifying chemicals and proteins that can be used to target specific diseases. AI can also help screen drugs by testing for efficacy much more quickly than traditional methods. Personalized care could also improve patient outcomes by improving the ability to predict, diagnose, and treat disease through the analysis of genetic data. Finally, there is an administrative burden as simple tasks such as scheduling appointments and data entry take time and resources. These tasks can be automated with the effective use of AI, freeing up staff to spend more time with more patients.
opportunity:
Many of the big technology companies that investors already have investments in, such as Amazon, Microsoft and Alphabet, are working with the healthcare industry. Others, such as IBM, have specific products such as Watson for Oncology and Watson for Genomics that will improve the healthcare system. We are invested in Bellevue Healthcare Trust, which offers exposure to some of the most promising companies in various healthcare subsectors. We are also impressed with Syncona, a closed-end trust that invests in attractive life sciences companies and is trading at a significant discount to its asset value. We believe the companies underlying these two mutual funds will benefit from AI to improve the healthcare system and improve patient outcomes.
How to invest:
BI’s Yap says Global X Funds’ Global X Artificial Intelligence & Technology ETF (AIQ) is an indirect way of implementing Boardman’s strategy. While AIQ has no exposure to health care, it tracks an index made up of companies in developed markets that are poised to benefit from adopting artificial intelligence technologies in their products and services.
