What are Pharma Funds: Meaning and Advantages

Are you feeling tired of this stock market’s fluctuating trends? No worries! We got you.

Look no further than Pharmaceutical funds. These funds invest in the pharmaceutical and healthcare sectors and provide potential security against the market’s instability, often experienced in other industries.

This means that pharma funds can be best suited to investors looking for even safer and steadier growth. Such funds offer a unique and exciting opportunity to capitalize on the sustainable growth and growing potential that characterizes the healthcare and pharmaceutical industries every day.

In this article, we will evaluate pharma funds, including their definitions, advantages, types, risk factors, and regulatory guidelines. We are sure that this article will help you in your journey of finding and analyzing the best mutual fund for you!

So, without any delay, let’s get started!

What are Pharma Funds?

Ok! Let’s make it simple, 

Pharma funds are also mutual sectoral funds that focus on investing in companies belonging to the healthcare and pharmaceutical industries. These are sectoral funds, and SEBI has guidelines for sectoral funds to invest 80% in equity and equity-related instruments of that company in that sector. 

The high demand for healthcare services and medicinal products creates a unique opportunity for investment in pharmaceutical funds within that sector. Indeed, investment in pharmaceutical funds gives hopefuls a chance to take part in the fast flourishing of healthcare, with the increasing need for new medical solutions and treatment techniques.

Now let’s look at some of the key types of pharma funds;

Types of pharma funds

We can classify pharma funds into some types based on their nature and criteria of investment into different types. Let us see some of the common types below:

• Active pharma funds:The detailed research and in depth analysis by the manager about the pharmaceutical and healthcare sectors direct where the money invested in this fund is to be applied. 

• Index pharma funds: This fund tracks some specific pharmaceutical or healthcare index. An investor can get returns by trying to emulate the performance of the underlying index.

• ETF pharma funds: This is a stock market-traded fund that offers an investor a cost-efficient route to secure exposure to these sectors.

• Global Pharma Funds: These are funds that invest in the global pharmaceutical and healthcare sector. This fund allows the investor to benefit from the healthcare market at a global level.

These are a few of the available pharma funds in the market, offering a choice to suit different investment preferences and objectives.

Advantages of pharma funds

Pharma funds can be the best choice for investors who are looking to increase their portfolio with steady growth. There are so many advantages we can list out of pharma funds if we compare this with other mutual funds; some of them are given below:

• Stability and steady growth: Pharma funds provide an opportunity for investors to benefit from the steady growth of these two sectors by offering a relatively stable investment avenue compared to other industries.

• Long-term growth potential: Growing demands in healthcare services and needs in pharmaceutical products, in general, offer scope for attractive long-term returns in pharma funds.

• Innovation: It provides exposure to new breakthrough medicinal discoveries and technological innovations with the potential to significantly drive growth in the healthcare sector.
• Global opportunities: Such funds offer investors exposure to healthcare markets globally, thereby helping them take advantage of growing healthcare industries outside their domestic borders.

The above-mentioned are some of the advantages of Pharmaceutical funds; overall, they can be an attractive option for investors seeking stability and sustained growth within the healthcare and pharmaceutical industries.

Regulatory Guidelines for Pharma Funds

Knowing the proper guidelines of any mutual fund is very important before investing in it. So, let’s examine some of the regulatory guidelines for Pharmaceutical Funds.

• Drug approval process
• Clinical test transparency
• Adverse event reporting
• Risk management and compliance programme
• Good manufacturing practices

Following regulatory guidelines is essential for ensuring pharmaceutical products’ integrity,  safety, and effectiveness and maintaining the stakeholders while checking for global markets.

Risk factors of Pharma funds

We saw the types and advantages of pharma funds, but to evaluate or understand them correctly, we also need to know about their risk factors. 

Come, let’s figure out them:

• Regulatory risk: Changes in regulations related to pharmaceutical healthcare sectors can impact the performance of pharmaceutical funds. These changes can affect drug approval processes, clinical tests, etc.
• Business and operational risks: If we examine business and operational risks, they can include competition, technological, operational, inefficiencies, and strategic missteps by the companies in which the fund invests. 
• Currency and global risks: This risk is related to currency fluctuations and geopolitical events. Investments in pharma funds with international exposure can be affected by global economic uncertainties.
• Market and economic risks: These funds are influenced by border market and economic risks such as interest rate changes, inflation, and overall market volatility. Economic downturns and shifts in investor sentiment can impact the performance of pharma funds.

It is imperative for investors to thoroughly research and assess these risk factors before committing to a particular investment and to make well-informed decisions based on their findings.

On a Parting Note….

Investing in a profitable platform always helps you increase your portfolio, but before selecting any funds, thorough research is needed because there will be some risk factors in all kinds of mutual funds. We hope that this article gives you a clear idea about pharma funds. These funds provide an opportunity with the potential for long-term growth, innovation and diversification to investors who wish to gain from the growing demand for healthcare services and products. Also, Pharma funds come in types like actively managed and passively tracked (both index-based), or you can even invest through ETFs, which suit different investor requirements, adding to the value of carving a place for them in investment portfolios. 

Please share your thoughts on this post by leaving a reply in the comments section. Contact us via Phone, WhatsApp, or Email to learn more about mutual funds, or visit our website. Alternatively, you can download the Prodigy Pro app to start investing today!

Disclaimer – This article is for educational purposes only and does not intend to substitute expert guidance. Mutual fund investments are subject to market risks. Please read the scheme-related document carefully before investing.