Blog

Greater China-Based Private Equity Investors’ Appetite for the Healthcare Sector

by Jaycee Man

  • 25 May 2018
  • PE

An increasing proportion of Greater China-based private equity investors are showing an interest in the healthcare industry: half of the 462 Greater China-based investors tracked by Preqin have expressed a preference for the sector, a 19-percentage-point increase from the same time last year. This blog seeks to provide insight into the investment appetite of these healthcare investors and look at how they are accessing the industry.

Investor Type
Institutional investors account for 87% of Greater China-based investors with a preference for healthcare investments. While both public and private sector pension funds are included in this pool, the top three investors types are corporate investors (32%), investment companies (20%) and government agencies (12%). For instance, in a state-controlled economy such as China, government agencies are pioneers to invest in the sector, guided by the policies of the government.

 

Regions Targeted
As shown in the chart above, 95% of Greater China-based private equity investors with a preference for healthcare favour investments in their home region. Recent efforts of Greater China’s governments to develop the sector may have contributed to the strong preference for domestic investments; the Chinese government invested CNY 42bn to build hospitals and clinics throughout 2011-2015, and in 2016 introduced Healthy China 2030 as an effort to boost development in the medical service and other healthcare-related sectors. These initiatives aim to address the issues arising from China’s economic growth and rapidly aging population. 

Due to increasing demand for advanced medical tools, Taiwan announced its commitment of TWD 2bn for its domestic medical equipment industry. Although Greater China-based investors primarily target their home region, they are also looking further afield for healthcare-focused investments – primarily in North America (28%) and Europe (22%). These developed markets have favourable investment environments, providing opportunities such as the tax reform in the US which lowers corporate rates for healthcare acquisitions.

Outlook
Looking forward, healthcare remains one of the most-targeted sectors by investors based in Greater China: 45% of investors are looking to allocate capital to the industry in the next 12 months, while 55% have a more general preference for technology investments and 67% seek a diversified portfolio. Over the next 12 months investors will also focus on healthcare-related sectors, such as pharmaceuticals (20%) and life sciences (15%). Chang'An International Trust, a China-based wealth manager, seeks to allocate CNY 1-1.5bn to a number of sectors including healthcare. Among the investors based in the region, Bank of China Group Investment and Baosteel are also looking to pursue new private equity fund commitments in healthcare over the coming year. As the industry continues to grow and find new ways to cater to the population’s increasing medical needs, the healthcare investment landscape will remain attractive to Greater China-based investors.

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