Hedge funds have increased their exposure to US healthcare stocks to near the highest level in five years, according to a report by Reuters citing a recent note from the prime brokerage division at Goldman Sachs.
The move comes as investors position for continued growth driven by artificial intelligence, pharmaceutical innovation and a stronger mergers and acquisitions environment.
The bank said hedge fund allocations to the healthcare sector relative to broader US equities approached a five-year high during the week ending 24 July, marking a second consecutive week of net buying by hedge funds.
Portfolio managers were particularly active in healthcare equipment and supplies, life sciences tools and pharmaceutical companies, reflecting growing confidence in the sector’s earnings prospects.
Goldman Sachs highlighted several structural drivers supporting the industry, including the increasing use of AI in drug discovery, improving research productivity and expectations that healthcare dealmaking will reach approximately $173bn in 2026, its highest level since 2019.
The bank also noted that an accelerated approval process at the US Food and Drug Administration has helped improve the outlook for biotechnology and pharmaceutical companies, with new drug approvals reaching their highest annual level since 2020.
While regulatory uncertainty remains a feature of the sector, healthcare-focused hedge funds continue to identify opportunities. Felix Lo, a portfolio manager at Trium Capital, said increased volatility around drug approvals has been accompanied by more attractive acquisition opportunities, with smaller pharmaceutical companies becoming more willing to accept discounted takeover offers in exchange for transaction certainty.
Healthcare-focused hedge funds have significantly outperformed broader equity hedge funds over the past year. According to Goldman Sachs, specialist healthcare managers generated returns of nearly 40% between August 2025 and April 2026, compared with around 17% for general equity long/short hedge funds over the same period.
The sector’s strong performance has also encouraged new fund launches. Goldman estimates that almost a quarter of all hedge funds launched this year have been dedicated to healthcare strategies, representing the highest proportion since at least 2009.
Healthcare remains one of the largest specialist segments within the equity hedge fund universe. Goldman estimates that approximately $283 billion of the roughly $1tn managed by equity hedge funds is invested through dedicated healthcare strategies.
