Healthy returns from investing in wellbeing

Healthy living might just be a New Year fad for some but, according to Peter Kirkman, fund manager of the JPM Global Consumer Trends Fund, it presents a compelling long term investment theme. In particular the growing demand for pharmaceuticals in emerging markets mean investing in health and wellness will be paying dividends long after our New Years resolutions have faded.

Peter Kirkman comments: "Growth for the healthcare sector is shifting eastwards. Not only is there a growing population to look after but there is also a lot of catching up to do in terms of understanding the relationship between healthcare spending and productivity".

Emerging markets are forecast to contribute 70% of pharmaceutical growth in the next five years. Added to this, the Chinese government is committed to investing £125bn to support healthcare reform between 2009 and 2011. Governments in Russia and Brazil have made similar commitments.

There has been a rapid rise in incomes in emerging markets, an unprecedented amount of state healthcare insurance expansion and health infrastructure building meaning pharmaceutical sales from the East are now eclipsing those of developed markets. Pharmaceutical consumption growth also outstrips per-capita GDP growth. Chinese GDP has grown around 10% in recent years whilst pharmaceutical spend growth has been 25-30% per year.

According to Kirkman, it is Western brands that are the real beneficiaries of this demand. "In emerging markets, branded drugs dominate the market as they are seen as the best proxy for quality as they are in the developed world."

As well as the latent demand, pharma companies are also benefiting from the changing patient-needs in emerging markets. Sanofi-Aventis is a major Diabetes drug manufacturer and has 30% of its custom coming from emerging markets as Diabetes becomes a growing problem there. In Russia, for example, 45 million people have Dyslipidemia which is caused by too much cholesterol in blood.

Kirkman concludes: "Investors can tap into the emerging market healthcare boom by investing in Western pharmaceutical brands who are active in emerging markets. Stocks like GlaxoSmithKline, for example, have high EM exposure with 16% of their total sales for the first nine months of 2010 coming from the region.

The JPM Global Consumer Trends Fund was launched in April 2008 at the start of an extremely turbulent period for world stock markets, yet it has performed exceptionally well. The fund has returned 43% since inception, outperforming global equity markets by 37%. The fund is diversified across sectors and regions and the alpha generated by the fund has come from a very broad range of companies with high Emerging Market exposure.