Healthcare is often described as a defensive sector — one that holds its value through economic downturns because demand for medical treatment does not disappear in a recession. That description is largely accurate, but it sells the sector short. Healthcare has also delivered some of the strongest capital appreciation of any sector over the past two decades, driven by extraordinary scientific progress, structural demographic tailwinds, and expanding global access to treatment.
For internationally mobile HNW investors building globally diversified portfolios, healthcare warrants serious consideration — not simply as ballast against cyclical risk, but as a genuine source of long-run return. This guide sets out the key subsectors, the structural investment case, the risks (including the disruption currently underway from GLP-1 obesity drugs), and the most practical access routes.
Demographic Tailwinds: The Ageing OECD
The ageing populations of the developed world are the most durable structural driver for healthcare demand. By 2030, the over-65 population of OECD countries will represent a larger share of the total than at any point in modern history. People over 65 consume, on average, four to five times more healthcare resources than younger adults. This is not a forecast or a thesis — it is a mathematical consequence of demographics that are already locked in.
Japan, Germany, Italy, South Korea, and the United Kingdom all have advanced ageing profiles. The United States — the world's largest healthcare market by spending — is seeing the Baby Boomer generation move through its peak healthcare consumption years. Emerging markets, particularly China and parts of Latin America and East Asia, are also ageing rapidly and are investing heavily in expanding healthcare infrastructure to meet rising demand.
The implication for investors is that the addressable market for healthcare products and services is growing in structural terms. Revenue growth for well-positioned companies does not depend primarily on economic cycles or consumer discretionary spending.
Healthcare Subsectors: Very Different Risk-Return Profiles
Healthcare is not a monolithic sector. The subsectors within it have materially different characteristics.
Pharmaceuticals (large-cap) includes companies such as AstraZeneca, GSK, Novo Nordisk, Roche, Pfizer, Merck, Johnson & Johnson, and Eli Lilly. These businesses are characterised by high margins, large cash flows, significant R&D expenditure, and the constant challenge of patent cliffs — the loss of revenue protection on key drugs. Large pharma is generally the most liquid and globally diversified part of the sector.
Biotechnology is higher risk and higher reward. Biotech companies range from large-cap platforms (Amgen, Gilead, Regeneron) to small pre-revenue firms betting on a single drug candidate. The sector has historically shown significant volatility and binary outcomes. It is not for the risk-averse, but specialist biotech funds have delivered exceptional long-run returns for patient investors.
Medical devices (Medtronic, Stryker, Intuitive Surgical, Becton Dickinson) provide equipment ranging from surgical robots to diagnostic imaging to orthopaedic implants. This subsector tends to be more stable than biotech, with recurring revenue from consumables and services, but is sensitive to hospital capex cycles.
Health information technology (or health IT) encompasses electronic health records, data analytics, AI-driven diagnostics, and health management software. This is a growth area where technology companies increasingly intersect with healthcare — and where valuation discipline is important.
Hospitals and healthcare services (more prominent in the US, less so in European markets dominated by public provision) offer a different risk profile: real-asset characteristics, regulatory exposure, and sensitivity to reimbursement rates.
Performance: MSCI World Health Care Index
The MSCI World Health Care Index has delivered strong long-run performance. Over the decade to end-2025, the index broadly matched or slightly outperformed the MSCI World All Countries Index in sterling terms, with notably lower volatility during the 2022 broad equity market correction. This defensive-growth combination is appealing to investors seeking some protection against economic downturns without sacrificing return potential entirely.
Healthcare is typically underweight in passive world index funds relative to its economic importance, because many healthcare companies are domestically focused rather than globally listed. This can make a dedicated healthcare allocation additive to a broad market portfolio.
The Patent Cliff and GLP-1 Disruption
Two risks deserve particular attention.
The patent cliff is a recurring feature of pharmaceutical investing. When a blockbuster drug loses patent protection, revenues typically decline sharply as generic or biosimilar competitors enter the market. Several major pharmaceutical companies face significant patent expirations in the 2025–2030 window, including key drugs across multiple therapeutic areas. How effectively companies replace these revenues through their pipelines is a critical question for stock-pickers and active managers.
GLP-1 drugs (glucagon-like peptide-1 receptor agonists) are the most significant recent disruption in healthcare. Originally developed for type 2 diabetes, drugs such as semaglutide (marketed as Ozempic and Wegovy by Novo Nordisk) and tirzepatide (Mounjaro and Zepbound by Eli Lilly) have demonstrated remarkable efficacy for weight loss and are now generating extraordinary commercial results. Novo Nordisk briefly became Europe's most valuable listed company on the back of semaglutide demand.
The disruption goes beyond the manufacturers' success. GLP-1s are being studied for cardiovascular benefits, alcohol dependence, sleep apnoea, and other conditions. If their efficacy is confirmed across a wider range of conditions, they could reduce the long-run burden on parts of the healthcare system — creating winners (GLP-1 manufacturers, supply chain companies, device firms) and potential losers (companies whose revenues depend on treating obesity-related conditions that GLP-1s might prevent).
ETF Options for Global Exposure
iShares Global Healthcare UCITS ETF (ticker: HEAL on LSE) tracks the S&P Global Healthcare Index and holds a broad mix of large-cap pharmaceutical, biotech, medical device, and healthcare services companies globally. The total expense ratio is approximately 0.40%.
Xtrackers MSCI World Health Care UCITS ETF provides exposure to the MSCI World Health Care Index at a comparable cost.
Polar Capital Global Healthcare Trust (LSE: PCGH) is a London-listed investment trust offering active management of a global healthcare portfolio — useful for investors who believe active selection adds value in a sector with complex science and frequent M&A.
US healthcare is the largest component of any global healthcare fund, given the size of the US market. Investors should be aware that US healthcare returns are partly a function of US reimbursement policy — in particular Medicare and Medicaid rates — which are subject to political change.
NHS Privatisation and UK Market Dynamics
The UK healthcare investment landscape is shaped by the structure of the National Health Service. Most healthcare services are publicly delivered, limiting the investable universe of UK-listed healthcare services companies. AstraZeneca and GSK are the dominant UK-listed pharmaceutical companies; both are globally diversified and only partially exposed to UK domestic healthcare policy.
Ongoing debates about private participation in NHS service delivery may create investment opportunities in health IT, diagnostic services, and primary care — but the pace and scale of any privatisation trend remains uncertain and politically contested.
Risk Summary
Healthcare's defensive characteristics are genuine but should not be overstated. In severe market downturns, the sector tends to fall less than the broad market but still falls. Biotech sub-components can be highly volatile. Regulatory and reimbursement risk (particularly in the US) can materially affect valuations. Patent expirations create earnings cliffs that are challenging to predict with precision.
Currency risk is relevant for UK investors in globally diversified funds: US dollar exposure (from US healthcare companies) has generally been beneficial over recent years but could reverse.
As with all investments, values can fall as well as rise. This article is for information only and does not constitute investment advice. Tax treatment depends on individual circumstances.
How Global Investments Can Help
Our advisory team helps internationally mobile HNW clients make informed sector allocation decisions within the context of their overall portfolio strategy. Whether you are looking to add a healthcare allocation as a defensive counterweight, access biotech growth through a specialist fund, or simply ensure your existing portfolio has the right balance of sector exposure across geographies and market cycles, we can help.
Contact our team to discuss your investment objectives and how healthcare might fit within your portfolio.
This article is for general information only and does not constitute financial, legal or tax advice. Rules, prices and regulations change; verify current requirements with a qualified adviser before acting.