The Mutual Fund Show: How To Add Healthcare Exposure To Portfolio During Pandemic

Axis Mutual Fund has launched an exchange traded fund focusing on healthcare, at a time when the sector is receiving renewed interest amid a second wave of Covid-19 infections in India.

The Axis Healthcare Exchange Traded Fund, a passive investment offering, will cover the broader healthcare sector—including hospitals, diagnostics centres, drugmakers, and research and development firms.

It’s an open-ended equity scheme that seeks to replicate or track the Nifty Healthcare Index—which comprises 20 of largest companies by market value in this sector. However, unlike mutual funds, ETF units will be listed on the exchanges and can then be traded.

“There are companies in India in segments like diagnostics hospitals, clinical research and even our pharma firms that have significant opportunities to grow as they look to meet the burgeoning demand in India,” Ashwin Patni, head products and alternatives of Axis AMC, explained on BloombergQuint’s weekly series The Mutual Fund Show.

Patni said these companies can drive efficiencies by offering globally competitive services just like they have done in the export market. “The underpenetrated and unorganised nature of the healthcare system offers significant room for growth at scale for organised players to flourish.”

Tarun Birani, founder and director of TBNG Capital Advisors, however, advised against buying into a new ETF, saying people would be better off buying healthcare mutual funds with a 10-year track record.

He said investors seeking sectoral exposure can opt for healthcare funds from Nippon AMC that have a proven track record, with a three-year annualised growth rate of 23% and delivering 21% annualised returns since its inception in May 2004.

Birani urged investors to add global funds to their portfolio, with some of the best companies located outside India. One can look at diversifying to the extent of 70% in developed markets and 30% in emerging markets outside India, he said.