Innovation in healthcare has long been considered a crucial part of shaping the world of tomorrow. But with the world now in the midst of a viral pandemic, you can bet dollars to donuts that improving and fundamentally reshaping healthcare for the better will shoot up the list of government priorities once the crisis ends.

The importance of healthcare companies has already been seen in the rising share prices of many, including Novacyt (NCYT:AIM) which has risen 13-fold since 1 January, and even FTSE 100 giant AstraZeneca (AZN) whose shares recently hit an all-time high.

As with a lot of sectors in the stock market, a good way to get exposure to an area in demand – but with the benefit of diversity and potentially less volatility – is through an exchange-traded fund (ETF).

ETFs typically track indices which contain a range of large and mid-cap companies across several developed market countries.

At £621m in assets under management, one of the most popular choices for healthcare ETFs is iShares Healthcare Innovation (DRDR), and for good reason.

While there is clear long-term structural growth ahead – and this is the reason why investors should consider this ETF, as opposed to focusing on short-term performance – iShares Healthcare Innovation is also providing strong returns right now.

Packed full of diagnostics companies, with three of the top five holdings directly involved in coronavirus testing at the moment, many of the stocks being tracked by the ETF have seen strong demand and this has been reflected in the returns.

In the year-to-date, the ETF has returned 14.3% and has a three-year annualised return of 13.5%, well ahead of most other ETFs in the sector. It is also one of the cheapest, with a total expense ratio of 0.4%.

Before the coronavirus pandemic, healthcare was already an area set for strong long-term growth. At the start of the year, it was estimated that between 10% and 11% of global GDP is spent on healthcare.

Pre-coronavirus this figure was estimated to at least double in the next 10 years, as rapid urbanisation and a growing and ageing global population place a greater strain on health infrastructure.

While there are no reliable forecasts now for healthcare spending going forward, the structural growth drivers in the healthcare industry will have only intensified during the current pandemic.

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