Venture Capital Firms, Mutual Funds Step Up Investments in Health IT

September 8, 2014 in News

Venture capitalists and mutual fund managers seeking to benefit from the shift to electronic health records and personal health monitoring devices are increasingly investing in companies that collect and analyze health care data, Reuters reports (Randall/Farr, Reuters, 9/3).

Details of Investments

Overall digital health funding for the first six months of 2014 totaled $2.3 billion among 143 companies, more than the total amount raised in all of 2013, according to a report from Rock Health (iHealthBeat, 7/14). That represents a 176% increase in venture capital funding compared with the same period in 2013.

Meanwhile, investments in health care by mutual funds have increased by 14% over the past three years and now comprise 16% of all mutual funds, according to Lipper, a performance analytics service. In addition, investments in health care companies by actively managed technology mutual funds have increased from 2% to 4% over the past three years, according to Morningstar data.

Reasons for Investment Increases

According to Reuters, investment in health IT has increased as the result of aging U.S. and European populations and U.S. hospitals transitioning to EHRs.

Other fund managers have said they invested in health IT because of:

  • Expected increases in U.S. health care spending;
  • Health IT companies being among the most innovative and earliest users of new science and IT; and
  • The ability of such technology to disrupt established companies.

Examples of venture capitalists and mutual funds investing in health IT companies include:

  • Ivy Science and Technology Fund, which currently has about 14% of its $5.6 billion portfolio invested in health care funds; and
  • Waddell and Reed Science Technology A Fund, which currently has about 14% of its $3.7 billion portfolio invested in health care funds (Reuters, 9/3).
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