Nick Dignam from Fortitude Investment Partners shares insights with Lachlan Maddock from Fortitude Investment Partners on how a diversified portfolio in mid-market private equity is structured. The Inside Adviser
The world of alternative investments is at a crossroads. As markets defy expectations and liquidity concerns take centre stage, investors find themselves forced to rethink how they deploy capital in an increasingly complex environment.
‘Opportunity rich’ healthcare sector a high conviction play for HMC
After establishing itself as one of the country’s premier dealers in wholesale real assets, HMC Capital has turned its eye to the healthcare sector with the recent launch of Healthcare and Life Science (UHF) unlisted real estate fund.
This comes on the back of its existing healthcare property trust, HealthCo Healthcare and Wellness REIT, and underscores what HealthCo senior portfolio manager Sam Morris (pictured) calls the ‘high conviction’ lens the firm views the sector through.
“The healthcare sector is opportunity rich and supported by favourable megatrends,” Morris explained on a recent blog post, “which will underpin long term demand for healthcare services irrespective of the market and economic cycle.”
The real estate fund’s launch caps a significantly expansionary period for the commercial juggernaut. The listed property group, launched by former UBS banker David Di Pilla, originally gained notoriety by flipping the old Woolworths Masters portfolio of real assets into community retail centres, before eventually creating a pro-active management style equity fund.
Morris now says the healthcare sector opportunity is not only “significant”, but affords investors relatively non-correlated returns in a vertical that isn’t tied to general market movements. And with an ageing population, the demand for healthcare services is only going in one direction. “[There is] well over $90 billion of new investment required to meet demand over the next 20 years,” he added.
De Pilla’s group is actively taking advantage of the opportunity set, recently purchasing the HealthScope portfolio of 11 private hospitals which Morris says represent “critical healthcare infrastructure” in Australia’s major capital cities.
The purchase is recorded a the largest major healthcare transaction since 2019, with Morris revealing the investment has a forecasted unlevered internal rate of return of over 9 per cent per annum. The investment also has total inflation protection, he added, with 100 per cent of the leases CPI-indexed.
The real driver for investors, Morris believes, is the healthcare sectors low correlation with other investments.
“The sector has non-cyclical demand drivers including a growing and ageing population,” he said, noting that conventional real estate assets don’t boast these factors.
“We continue to avoid traditional real estate sectors which are facing both structural and cyclical headwinds, and offer limited pricing power to offset elevated and rising interest rates.”
