Good health is important to all of us. The Healthcare and Pharmaceutical industry plays a crucial role in it. Nowadays, technology is rapidly increasing the development of these sectors. When building a mutual fund portfolio, an investor may want to add the best Healthcare Fund, which ultimately helps an investor to diversify the portfolio. Even though these funds are sectoral/thematic, they are not too volatile like other sectors such as infra, defence, etc.
If you are an investor who wants to invest in the health industry to grow long-term wealth, Pharma and Healthcare Funds should be considered. In this article, we have prepared top of the healthcare mutual funds, so you can get a brief overview about these funds. So, before learning about the funds, you should be aware of “What are Pharma and Healthcare Mutual Funds?”
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What are Pharma and Healthcare Funds?
Pharma and healthcare funds are specialized mutual funds that primarily invest in companies operating within the pharmaceutical and healthcare sectors. These funds aim to capitalize on the growth potential of firms engaged in the development of pharmaceuticals, biotechnology, healthcare services, and medical devices. By pooling investor capital, these funds provide a diversified portfolio that can include stocks from various companies, which make it easier for individual investors to gain exposure to this sector without needing extensive industry knowledge.
Investing in pharma and healthcare funds can be particularly appealing due to the consistent demand for healthcare products and services. The sector is often considered defensive, meaning it tends to perform steadily even during economic downturns, as people continue to require medical care and medications. This characteristic makes pharma funds a potential safe haven during market volatility. Additionally, the ongoing advancements in medical technology and an aging population contribute to the sector’s growth prospects, which make these funds attractive for long-term investors looking for capital appreciation.
However, investing in pharma and healthcare funds comes with its risks. Since these are sectoral funds, they are subject to concentration risk. Generally, these funds are recommended for investors who possess a higher risk tolerance and believe in the long-term growth of the healthcare sector.
Here are the top 6 healthcare and pharma mutual funds:
1. ICICI Prudential Pharma Healthcare And Diagnostics (P.H.D) Fund
ICICI Prudential P.H.D Fund is a high rating fund in healthcare and pharma mutual fund category. The fund predominantly allocates around 90% of its assets to healthcare, with significant holdings in companies like Sun Pharmaceutical Industries, Dr. Reddy’s Laboratories and Cipla. ICICI Prudential P.H.D Fund ranks among the top performers in the pharma fund category.
| Duration | CAGR | Absolute Returns |
|---|---|---|
| 1 year | 61.68% | 61.89% |
| 2 years | 40.70% | 98.14% |
| 3 years | 23.70% | 89.42% |
| 5 years | 32.33% | 306.43% |
| Since inception | 24.87% | 304.40% |
2. HDFC Pharma And Healthcare Fund
The HDFC Pharma and Healthcare Fund has performed well compared to its benchmark BSE Healthcare TRI. It has shown impressive performance compared to other pharma sector funds. The Fund is well-positioned for future growth within the pharma sector.
| Duration | CAGR | Absolute Returns |
|---|---|---|
| 1 year | 63.28% | 63.50% |
| Since inception | 56.45% | 60.72% |
3. DSP Healthcare Fund
DSP Healthcare Fund fund is a good healthcare fund. The minimum investment required for the DSP Healthcare Fund is ₹100. This applies to both SIP and lumpsum investments. Same for the HDFC Pharma And Healthcare Fund. The exit load for the DSP Healthcare Fund is 0.50% if units are redeemed within 1 month of investment. After this period, no exit load is applicable for redemptions.
| Duration | CAGR | Absolute Returns |
|---|---|---|
| 1 year | 55.52% | 55.89% |
| 2 years | 39.40% | 95.02% |
| 3 years | 22.57% | 84.45% |
| 5 years | 33.11% | 318.49% |
| Since inception | 28.44% | 338.29% |
4. SBI Healthcare Opportunities Fund
SBI Healthcare Opportunities Fund has shown strong performance driven by its focused investment strategy in the healthcare sector. The fund employs a growth-oriented, bottom-up stock-picking approach, selecting companies with robust fundamentals and sustainable competitive advantages. Its performance metrics indicate a consistent ability to outperform many sector peers.
| Duration | CAGR | Absolute Returns |
|---|---|---|
| 1 year | 54.36% | 54.54% |
| 2 years | 36.96% | 87.73% |
| 3 years | 23.85% | 90.09% |
| 5 years | 30.71% | 282.11% |
| 10 years | 15.46% | 322.10% |
| Since inception | 18.89% | 673.02% |
5. Nippon India Pharma Fund
Nippon India Pharma Fund is a specialized mutual fund focusing on investments within the pharmaceutical sector. The fund allocate more than 75% of investments in Pharmaceuticals & Biotech sector and more than 15% in Healthcare Services. For those investors who prefer a higher AUM fund, Nippon India Pharma Fund is that one. It is an old and high AUM mutual fund in the pharma sector with more than 10 years of historical records. Also, the SBI Healthcare Opportunities Fund is an old fund in the healthcare sector.
| Duration | CAGR | Absolute Returns |
|---|---|---|
| 1 year | 49.94% | 50.11% |
| 2 years | 34.27% | 80.42% |
| 3 years | 20.10% | 73.34% |
| 5 years | 29.52% | 265.01% |
| 10 years | 16.59% | 365.39% |
| Since inception | 19.25% | 701.20% |
6. Quant Healthcare Fund
Quant Healthcare Fund was launched in July 2023. Within a year of its launch, the fund has provided more than 50% of return. Quant fund house is known for their aggressive investing style, which has given higher returns over the past few years for most of their funds. However, these types of strategy also make a fund more volatile in certain market conditions. Investors who prefer extended risk and expect higher return from an healthcare mutual fund, they can look at the Quant Healthcare Fund.
| Duration | CAGR | Absolute Returns |
|---|---|---|
| 1 year | 55.63% | 55.81% |
| Since inception | 42.95% | 62.52% |
Which Health care Mutual Fund is Best?
ICICI Prudential Pharma Healthcare And Diagnostics (P.H.D) Fund is considered best historically. It has a higher rating and the fund has given consistent returns. It also charges a higher expense ratio than other funds. If you prefer a lower expense ratio best active fund, take a look at DSP Healthcare Fund. Furthermore, if you prefer an index healthcare fund, the ICICI Prudential Nifty Pharma Index Fund is that one. This fund offers a lower expense ratio than actively managed funds.
Should You invest in Healthcare Funds?
Investing in healthcare funds can be a strategic choice for various types of investors, particularly those looking to capitalize on the sector’s robust growth potential. The pharma and healthcare industry is experiencing significant advancements driven by technological innovations, an aging global population, and increasing health concerns. These factors contribute to a rising demand for medical services, pharmaceuticals, and healthcare technologies.
Investors who are optimistic about the long-term prospects of the healthcare sector may find mutual funds focused on this area appealing, as they provide diversified exposure to a range of companies involved in pharmaceuticals, biotechnology, medical devices, and healthcare services.
Another compelling reason to invest in healthcare funds is their defensive characteristics. Historically, the healthcare sector tends to perform relatively well during economic downturns because demand for medical services remains stable regardless of economic conditions. This resilience can provide a cushion against market volatility, making healthcare investments an attractive option for those seeking stability in their portfolios. Moreover, as global health crises like the COVID-19 pandemic have illustrated, investing in healthcare not only offers financial benefits but also contributes to societal well-being by supporting essential services and innovations.
The demographic trends driving growth in the healthcare sector are profound. With an aging population that requires more medical care and advancements in technology leading to new treatment options, the demand for healthcare is expected to continue rising. Investors interested in long-term capital appreciation should consider allocating funds to this sector as it presents opportunities not only for financial gains but also for contributing to advancements in health outcomes. However, it is crucial for potential investors to remain informed about ongoing developments and regulatory changes within the healthcare industry to navigate its complexities effectively.
FAQs
Is it good to invest in healthcare mutual funds?
It is good to invest in healthcare mutual funds as health is wealth for all of us. But you need to remember that healthcare and pharma sector is stable than other sectors, which means you should not expect higher return. As per the data of Nifty Pharma, it has given 15% of CAGR return historically.
Which pharma Index fund is best?
ICICI Prudential Nifty Pharma Index Fund is best who want to invest in pharma sector through an index fund instead actively managed fund.
Is it good to invest in Nippon pharma fund?
Yes, it may good to invest in Nippon Pharma Fund. It is a higher AUM mutual fund with consistent return (not high, but consistent return) over the past years.
That’s it for this article. Do you have any questions regarding pharma and healthcare funds? Then do not hesitate to comment. We answer every queries of Mutual Fund Journal readers.
If you are thinking about investing in any of these funds, make sure to do proper research and take help from professionals. Because sectoral funds are a more risky investment. Also, we have written about the funds where you can invest in the Electronic Vehicle sector. These are EV funds.
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