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Over the last month, I’ve seen a fair bit of volatility in my SIPP. From Rolls-Royce to SpaceX, share prices have taken a hit.
However, there’s one ETF in my pension that has been surging lately and offsetting losses in growthier areas of the market. Up almost 15% in a month, this product is on fire at the moment.
Benefiting from the tech sell-off
The ETF I’m referring to is the Xtrackers MSCI World Health Care UCITS ETF (LSE: XDWH). It’s focused on large- and mid-cap stocks in the Healthcare sector.
This sector has been a major beneficiary of the rotation out of tech/AI stocks lately. And this has driven the price of the ETF up sharply.
This is why I own it
This is exactly why I invested in the ETF in the first place to be honest. I’ve always seen it as a great hedge against AI and a portfolio protector.
When tech stocks are tumbling, institutional investors typically move into more defensive areas of the market. And there are few sectors that are more defensive than healthcare.
Not just a defensive hedge
I’ll point out that it’s not just a defensive play for me. I also see long-term growth potential.
In this ETF, there are companies like Eli Lilly (the global leader in GLP-1 weight-loss drugs), Johnson & Johnson (an oncology powerhouse), and Intuitive Surgical (the global leader in robotic surgery). These businesses all look well positioned for long-term growth.
I don’t expect the ETF to do well for me all the time though. There are likely to be periods of underperformance.
We’ve seen this in the past. While the ETF is up about 18.5% this year versus less than 10% for the FTSE 100 index, it’s only up about 40% over five years, compared to 50% for the Footsie.
Still worth a look today
Is it still worth considering for an ISA and SIPP after its recent gains? I think it is.
As I said above, the long-term growth story here looks attractive. I reckon that over the next five to 10 years, the healthcare sector is likely to provide attractive returns.
The world’s ageing population could be a key growth driver. This is likely to boost demand for healthcare solutions.
Artificial intelligence technology could also be a driver of returns. In healthcare, AI can be used for accelerated drug discovery, operational and clinical workflow optimisation, and more.
Of course, as a sector-focused product, it lacks the diversification of a broader market-focused index fund. So, there are risks around the performance of the Healthcare sector.
I see it as an ideal complement to a broad index tracker like a FTSE 100 or S&P 500 index fund though. The way I see it, it could help investors build a more balanced portfolio.
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Edward Sheldon owns shares in the Xtrackers MSCI World Health Care UCITS ETF, Rolls-Royce, and SpaceX.
This story originally appeared on Motley Fool
