Two funds that will help ensure a brighter outlook for care homes

Two listed real-estate investment trusts in the care-home sector look attractively valued and offer a decent income too, says Max King.

Careworker and client © Karwai Tang/Getty Images
Demand for carfe-home places is rising steadily as the number of over-80s climbs
(Image credit: Careworker and client)

The two listed real-estate investment trusts (Reits) that own care homes, Impact Healthcare (LSE: IHR), with £360m of assets, and Target Healthcare (LSE: THRL) with £520m, have come through the Covid-19 crisis well. The stocks have fallen by 6% in six months. The former trades on a 4% discount to net asset value (NAV) and the latter a 5% premium. They both yield over 6%. The result is attractive but not too-good-to-be-true valuations.

The cost of care for the elderly has become a burning political issue. In 2019, £16.5bn was spent providing for around 450,000 elderly residents of 12,000 care homes. About 3.2 million people in Britain are over 80 and that number is expected to grow steadily over the next 20 years. Demand for beds in care homes is rising. Accountancy group Grant Thornton projects long-term growth of about 1.8% per annum, which, with existing homes full, requires new capacity.

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Max King
Investment Writer

Max has an Economics degree from the University of Cambridge and is a chartered accountant. He worked at Investec Asset Management for 12 years, managing multi-asset funds investing in internally and externally managed funds, including investment trusts. This included a fund of investment trusts which grew to £120m+. Max has managed ten investment trusts (winning many awards) and sat on the boards of three trusts – two directorships are still active.

After 39 years in financial services, including 30 as a professional fund manager, Max took semi-retirement in 2017. Max has been a MoneyWeek columnist since 2016 writing about investment funds and more generally on markets online, plus occasional opinion pieces. He also writes for the Investment Trust Handbook each year and has contributed to The Daily Telegraph and other publications. See here for details of current investments held by Max.