Disclaimer

This article is for general information and educational purposes only. It does not constitute investment advice, a personal recommendation, or a financial promotion within the meaning of the Financial Services and Markets Act 2000

Readers should make their own independent assessment and where appropriate seek advice from an FCA authorised advisor.

Investing in the Global Healthcare Sector

A large, evolving investment universe — with three illustrative fund routes for UK investors and an increasingly important role for artificial intelligence.

Healthcare: an essential industry with a powerful investment dimension

Healthcare combines defensive demand with technological innovation. People require healthcare regardless of the economic cycle, while ageing populations, chronic disease and rising medical expectations continue to increase demand. Across OECD countries, health spending averaged about 9.3% of GDP in 2024, while US spending exceeded $14,880 per person. IQVIA expects global medicine spending to exceed $2.6 trillion by 2030, with annual growth of roughly 5–8%. These are measures of economic activity rather than forecasts of investment returns, but they demonstrate the scale of the underlying market.

The investable universe is wider than the traditional pharmaceutical giants. It includes biotechnology, medical devices, diagnostics, healthcare services, managed care, laboratory equipment and the specialist companies that support drug discovery and clinical development.

Why investors might consider healthcare

Long-term drivers include demographic ageing, chronic disease and scientific progress. New medicines can create entirely new markets, while better diagnostics can expand the number of conditions that can be detected and treated. Healthcare companies can also possess valuable intellectual property and, when a new treatment succeeds, the resulting economics can be powerful.

The risks deserve equal prominence. Pharmaceutical patents expire, clinical trials fail, regulators can reject products and governments can exert pressure on drug prices. Biotechnology companies can be particularly volatile because valuations may depend on a small number of programmes. Global funds also introduce currency exposure for a sterling-based investor.

The conclusion is not that healthcare is automatically defensive or that every innovation will create shareholder value. It is that healthcare provides a broad, long-term investment universe in which the choice of fund can materially alter both opportunity and risk.

Artificial intelligence could become a major healthcare investment theme

The most interesting long-term development may be the interaction between healthcare and artificial intelligence. AI is already being used in diagnosis, clinical care, drug development, disease surveillance and health-system management. The World Health Organization says AI is already being applied through much of pharmaceutical development and suggests that, in future, nearly all medicines reaching the market may have been touched by AI somewhere in their development, approval or marketing.

For drug discovery, the potential is significant. Traditional development involves identifying biological targets, finding molecules that might affect them, testing candidates, assessing toxicity and efficacy, and then progressing successful candidates through increasingly expensive clinical trials. AI can analyse very large biological and chemical datasets, help identify potential targets, predict molecular interactions, design or optimise candidate compounds and assist with patient selection and clinical-trial analysis. The potential benefit is not simply faster computing: it could improve the probability of finding useful compounds and reduce wasted research effort.

This does not mean AI will suddenly make drug development cheap or predictable. Biology remains extraordinarily complex, models depend on data quality, and a promising computer prediction still has to survive laboratory work and clinical trials. Regulators are developing frameworks for responsible use. In January 2026, the US FDA and European Medicines Agency released ten common guiding principles for good AI practice in drug development, reflecting the expectation that AI will become increasingly embedded across the drug-product life cycle.

For investors, there are two broad potential beneficiaries: established pharmaceutical and biotechnology companies using AI to improve their research pipelines, and specialist companies supplying software, data, modelling and laboratory infrastructure. This means healthcare can increasingly overlap with the technology story without simply becoming a technology fund.

Three funds — from a much larger universe

There are many healthcare funds available to UK investors. The three below are illustrative examples, not a recommended shortlist, endorsement or claim that they are the best funds available. They have been selected because together they demonstrate three different approaches: passive sector exposure, active global healthcare selection and concentrated biotechnology exposure. Investors should conduct their own research and consider whether any fund is appropriate for their circumstances.

1. Legal & General Global Health & Pharmaceuticals Index Trust

This is the broadest and lowest-cost approach of the three. It aims to track the FTSE World Index – Health Care, giving investors exposure to the global healthcare industry without relying on an active manager to select individual companies. Its 169 holdings provide considerably more diversification than the two Polar portfolios.

The trade-off is that the fund will look like the sector. It will own companies that an active manager might consider expensive or unattractive, and performance will largely follow the global healthcare index after charges. For an investor wanting straightforward sector exposure rather than a specialist stock-picking view, that simplicity can be valuable.

2. Polar Capital Healthcare Opportunities Fund

Healthcare Opportunities is actively managed and substantially more concentrated, with roughly 33 holdings in the latest accessible data. The managers can allocate across pharmaceuticals, biotechnology, medical technology, services and other healthcare businesses rather than simply following index weights.

That flexibility creates the possibility of adding value through company selection, but also increases manager and stock-specific risk. A relatively small number of holdings can make a meaningful difference to returns. Investors are paying a considerably higher ongoing charge than with the L&G; tracker.

3. Polar Capital Biotechnology Fund

The Biotechnology Fund is the most specialised of the three. It focuses on biotechnology and related life-sciences businesses and therefore provides the strongest direct exposure to scientific innovation. Its portfolio contained 49 holdings at the latest accessible date.

This focus can be highly rewarding when new treatments, platforms or technologies succeed, but it comes with substantially higher volatility. Clinical results, regulatory decisions, financing conditions and changes in investor appetite can cause biotechnology valuations to move sharply. It is better thought of as a specialist exposure than as a simple substitute for a broad healthcare fund.

What the comparison tells us

These are different investment decisions, not a league table. L&G; is the broad, relatively inexpensive route; Healthcare Opportunities is a concentrated active-management proposition; and Biotechnology is a higher-risk specialist exposure to medical innovation.

The holdings graph makes the distinction clear. The tracker spreads risk across a large number of companies, whereas the Polar funds rely much more heavily on manager selection. That concentration can increase the potential impact of both successful and unsuccessful investment decisions.

Do your own research

These three funds are examples from a much wider range of healthcare investment choices. Investors should not regard their inclusion as a recommendation, endorsement or ranking. Before investing, examine the latest factsheet and prospectus, understand the objective and benchmark, review charges and share-class differences, consider portfolio concentration and geographical exposure, and assess performance over appropriate periods rather than relying on a recent return.

It is also worth considering what role a healthcare fund would play within an existing portfolio. A global equity portfolio may already contain substantial healthcare exposure through large pharmaceutical and technology companies. Adding a specialist biotechnology fund can therefore increase concentration rather than simply adding diversification.

Fund availability through an ISA or SIPP depends on the platform and particular share class. Charges may also differ between the fund’s ongoing charge and the total cost incurred by the investor. Those details should be checked directly with the fund provider and platform before making a decision.