Hedge funds have increased their exposure to healthcare stocks to a nearly five-year high
Breakthroughs in artificial intelligence, accelerated drug development, increased activity in the mergers and acquisitions market, and faster approval of new drugs are making the healthcare sector one of the most attractive for investors, according to Goldman Sachs analysts. Against this backdrop, hedge funds have increased their investments in the sector’s stocks to nearly a five-year high, Reuters reports, citing a note from the bank.
Details
In the week ending July 24, the relative share of hedge fund investments in the U.S. healthcare sector approached a five-year high, according to Goldman Sachs analysts cited by Reuters. Investors have been increasing their positions in this sector for the second consecutive week.
The greatest demand was for manufacturers of medical equipment and supplies, companies developing tools for biological research, and pharmaceutical companies. Goldman Sachs notes that one of the key drivers of the sector is the use of AI in the development of new drugs, which increases the efficiency of research. In addition, the bank forecasts that the volume of mergers and acquisitions in the industry will reach its highest level since 2019, at $173 billion.
The sector is receiving additional support from the acceleration of the new drug approval process: the number of drugs approved by the U.S. regulatory agency in 2025 was the highest since 2020, analysts note.
Investor interest is also reflected in the creation of new funds. According to the bank, 24% of all hedge funds launched in 2026 specialize in healthcare—the highest figure since at least 2009. Goldman Sachs also reported that of the approximately $1 trillion under management by equity funds, about $283 billion is held by specialized healthcare funds.
Context
In 2026, the process of obtaining regulatory approvals became more unpredictable, according to Felix Lo, a portfolio manager at Trium Capital, as reported by Reuters. Lo adds that small pharmaceutical companies are increasingly willing to accept a lower price in exchange for guaranteed cash payments during mergers and acquisitions. The analyst believes that this situation has helped create favorable conditions for closing deals.
According to a sector study by Goldman Sachs, specialized hedge funds investing in healthcare companies generated a return of about 40% for investors between August 2025 and April 2026. By comparison, diversified funds investing in stocks across various sectors earned 17% over the same period.
The total assets of the global hedge fund industry rose by a record $409.3 billion in the second quarter of 2026, reaching $5.6 trillion, according to data from research firm HFR cited by Reuters.
This article was AI-translated and verified by a human editor
