Healthcare has long been one of the largest sectors of the U.S. economy — but for family offices, it remains one of the most misunderstood.
Representing nearly 20% of GDP and continuing to grow due to demographic tailwinds and rising chronic disease, we believe the sector offers significant investment opportunity. Yet as several seasoned investors and operators discussed in a recent FO Pro: The Family Office Professional webinar, capturing that opportunity requires more than capital — it demands specialization, regulatory knowledge, access to strategic relationships and a deep understanding of how the different subsectors within the U.S. system work.
A Large Market — But Not an Easy One
The scale of healthcare is undeniable and its complexity is equally defining. Payment and incentives vary across government programs, employers and private insurers, while profit pools often sit in the links between pharma manufacturers, distributors and pharmacy benefit managers.
“It’s easy to be dangerously half-informed in healthcare,” said Jimmy Garmendia, head of investments at Dubin & Company. “There’s significant complexity in reimbursement, regulation and clinical nuance. You need domain expertise — this is not a place for tourists.”
That complexity potentially creates both risk and opportunity. Unlike many other sectors, healthcare is shaped not just by market forces, but by regulation, reimbursement frameworks and entrenched institutional relationships.
For David Jones Jr., chairman and founder of Chrysalis Ventures, who spent decades on the board of Humana Inc., a company started by his family, the defining challenge is not whether a solution works — but whether the system will adopt it.
“In healthcare, I’ve rarely spent time on a technology or innovative service offering that didn’t work,” he said. “The challenge is whether it gets paid for and scaled. That’s where investments succeed or fail.”
Why Private Markets Matter More Than Ever
In our view, one of the clearest themes from the discussion was the growing importance of private markets in healthcare investing.
While healthcare accounts for a significant share of economic activity, it remains underrepresented in public equity markets. At the same time, companies are staying private longer and private capital is playing a larger role in building and scaling businesses.
“Most investors think they have healthcare exposure through public markets,” said Michael Ludwig, partner at HLM Investment Partners. “But if you’re just investing in the S&P, you’re underexposed relative to the size of the sector. A lot of the value creation is happening in private markets.”
For family offices, that creates both a gap and an opportunity — one that can be accessed through funds, direct investments, or co-investments.
But as several panelists noted, access alone is not enough.
The Case for Specialist Managers
In our opinion, healthcare is not a sector where generalist investing approaches tend to thrive.
“Understanding the regulatory, reimbursement and clinical environment is not just important — it’s necessary,” Ludwig said. “That’s what drives outperformance.”
Garmendia echoed that point from the allocator perspective.
“We want real domain expertise, a repeatable playbook and access to proprietary deal flow,” he said. “It’s pretty hard to fake it in healthcare.”
For family offices, this often translates into partnering with specialist managers who bring both sector knowledge and operational experience — particularly in navigating the system’s many gatekeepers.
Jones emphasized that point as well, noting that success often depends on relationships with large payers, health systems and other institutional players.
“You have to understand who actually makes decisions in the system,” he said. “And you need partners who know how to navigate that.”
Where Opportunities Are Emerging
Despite the challenges, the panelists highlighted several areas of growing opportunity—particularly those tied to inefficiencies in the system.
Administrative costs alone account for an estimated 15–20% of healthcare spending, creating a large target for technology-driven solutions.
“We tend to focus where there’s high cost and inefficiency,” Ludwig said. “That’s where technology and services can take cost out of the system and improve outcomes.”
Some of the most compelling areas include:
- Healthcare technology and AI applications
- Care delivery models enhanced by technology
- Pharmacy and specialty drug cost management
- Employer-driven healthcare solutions
At the same time, certain traditional strategies — such as physician practice roll-ups — have become more challenging due to rising interest rates and increased regulatory scrutiny.
“There’s been a lot of focus on roll-ups over the last decade,” Ludwig noted. “But that model is facing more pressure today.”
The Rise of Consumer-Driven Healthcare
Another shift highlighted in the discussion is the growing role of consumers in managing their own health.
Advances in diagnostics, wearables and personalized medicine are changing how individuals interact with the healthcare system — and opening new investment opportunities.
“Ten years ago, direct-to-consumer healthcare was much more challenged,” Garmendia said. “Today, with increased awareness and access to technology, it’s far more feasible.”
While still evolving, this trend could reshape areas such as insurance underwriting, employer benefits and long-term health planning.
What Makes a Successful Investment
Across all strategies and sub-sectors, one theme stood out: execution matters more than theory.
“You don’t need heroics to win in healthcare,” Garmendia said. “You need better alignment, execution and domain expertise.”
For Joseph Mayer, Partner at HLM Investment Partners, investment success often comes down to finding businesses that have already shown financial and clinical ROI in one geography or with a handful of health system or insurance customers — and then helping them scale.
“We like founder-led businesses with proven product-market fit and clear unit economics,” he said. “We add value beyond capital by providing access to large strategics who can become partners, customers and sometimes acquirers.”
That approach is illustrated by VaxCare, a platform where HLM was the first investor and helped drive growth through strategic relationships. At the time of HLM’s investment, VaxCare primarily served pediatricians, then expanded to help large health systems deliver vaccines more effectively and economically. The company is now the third-largest vaccine provider in the country and was acquired by Blackstone in 2025 in a deal valued at around $1.7 billion.
“It’s about providing real value — taking avoidable cost out of the system while improving quality,” Ludwig said. “If you can do that, there will be demand.”
The Family Office Advantage
For family offices, healthcare investing presents a unique combination of financial and personal alignment.
Many families have direct experience with the healthcare system — whether through personal health journeys or philanthropic initiatives.
“Through philanthropic efforts, you often get a ground-level view of the patient journey,” Garmendia said. “That can lead to better understanding of unmet needs and better investment opportunities.”
At the same time, family offices often bring flexibility and long-term capital — advantages that can be particularly valuable in a sector where timelines are longer and outcomes less predictable.
A Sector That Rewards Patience
If there was one consistent message from the discussion, it was that healthcare investing requires patience—and the right partners.
“This is a ‘first, do no harm’ industry,” Jones said. “Change happens slowly.”
But for those who understand the system and can navigate its complexities, the rewards can be significant.
“We’re not going to fix healthcare overnight,” Jones added. “But there’s enormous opportunity to make a difference — and generate returns — by improving how the system works.”