New report reveals the healthcare infrastructure opportunity
03 December 2018
The latest institutional investor report published by Octopus reveals an increased enthusiasm for healthcare infrastructure investments. This can only be a good thing for society as a whole, suggests Benjamin Davis, chief executive of Octopus Healthcare.
Institutional investors are the giants of the investment world. These organisations invest money in enormous quantities for large proportions of people.
According to the UK Investment Association, its members manage £3.8 trillion on behalf of UK institutions, including public and private pension funds, insurance companies, savings institutions, investment companies, charitable foundations and not-for-profit organisations.
Pension funds are far and away the largest institutional client type, with 63% of institutional assets under management, while insurance companies have a 25% share of institutional assets.
So, it’s clear that institutional investors have a tremendous influence on which areas are invested in around the world.
Investing with purpose
And one of the most significant shifts within institutional investing over recent years has been the need to invest sustainably, in ways that positively benefit society. The entire movement towards making environmental, social and governance (ESG) issues part of decision-making when it comes to investing demonstrates this.
Making good returns for their clients is fundamental, clearly, but when these investments involve huge sums of money, it’s important to invest responsibly and in areas where the benefits to society are given fair consideration.
For institutions that are looking for investments that can appeal both to the head and to the heart, it’s clear that healthcare infrastructure is one sector that fits the bill.
Healthcare infrastructure defined
If healthcare is first and foremost about people – the doctors, nurses, caregivers and specialists whom you’re likely to encounter when in need of medical attention – healthcare infrastructure is all about environments. Healthcare infrastructure is about designing, building and managing doctors’ surgeries, care homes, retirement communities and hospitals, to name just a few.
For us, it’s the combination of the two that is crucially important. We believe that healthcare is an experience, and this experience is enabled by the design and development of great infrastructure that recognises unique and individual needs.
What does good healthcare infrastructure look like?
Good healthcare infrastructure has to satisfy a number of criteria. First, it should be planned and designed around peoples’ needs. It should facilitate high quality, accessible and safe healthcare services and it should make the most efficient use of space and resources.
But good healthcare infrastructure should also not only inspire confidence among the general public, but it should also help to recruit and retain the very best healthcare staff.
Because when healthcare professionals feel comfortable and secure in their surroundings, they are more likely to be motivated and to care about the services they provide and the people they look after.
Naturally, this all requires significant investment, which is where institutional investors come in.
Institutional investment into healthcare infrastructure
In our first institutional investment trends report, we surveyed more than 100 global institutional investors, to find out their views on the healthcare infrastructure sector. The investors we contacted represent a total of $6.8 trillion assets under management.
These institutions told us they currently allocate an average of 6.1% of their investment portfolios to healthcare infrastructure. However, our findings suggest that over the next five years, global institutions are expected to increase their portfolio allocation to an average of 9.5%. This would result in a further $200 billion invested into healthcare infrastructure by institutions worldwide.
The future for healthcare infrastructure
There’s a clear and compelling reason for institutions to increase their investment into healthcare infrastructure. A growing elderly population will continue to fuel high demand for healthcare services. By 2050, the global population of retirees aged 60 and over will reach 2.1 billion and will comprise an elderly population of 425 million people aged over 80.
Further investment into the sector will be crucial to ensuring the ageing population receives the quality housing and care they will need – from retirees to the elderly. In this report, we specifically look at the investment opportunity in retirement communities, care homes and doctors’ surgeries – the healthcare facilities that this varied ageing population will need the most.
At Octopus Healthcare, our mission is to create exceptional healthcare facilities you would choose for your loved ones. These are exciting times for the healthcare industry, and we believe there is a meaningful role for institutional investors to redefine what truly exceptional healthcare facilities should look like, while benefiting from the attractive returns the asset class offers investors over the long term.
This report shows that we’re fully committed to working with institutions of all sizes to meet the growing demand for healthcare infrastructure investment.