Amid questions about the direction of the global economy, investors doubled down on healthcare as a safe haven in 2016, driving up both the number and the value of deals, according to Bain & Company’s sixth Global Healthcare Private Equity and Corporate M&A Report.

Yet, with so much interest in overall healthcare assets, they faced intense competition for deals. This heated struggle bid up valuations and forced healthcare investors to get creative. Many funds took advantage of a disparity between public and private valuations for some healthcare assets, which prompted a surge in public-to-private transactions. The flip side of this trend was a falloff in the number of IPOs, amid a modest decline in overall exit activity.

In sharp contrast to the broader decline in PE deal-making, healthcare PE activity soared globally with disclosed deal values reaching US$36.4 billion in 2016, its highest level since 2007. That marked a nearly 60% increase from the total of US$23.1 billion in 2015. In Asia Pacific, activity was also strong, especially in the provider sector where deal count nearly tripled and there were a total of 52 buyouts, a return to levels last seen in 2013.

“As a long-term bet, healthcare is hard to beat,” said Kara Murphy, a partner in Bain’s Global Healthcare and Private Equity Practices and co-author of the report. “Deal activity will continue to be high as more funds look to deploy capital into the sector. Given the intense competition, funds will need to be increasingly creative to get deals done.”

After three consecutive record-setting years, total deal value in the Asia Pacific region declined somewhat in 2016, to US$3.2 billion from US$4.9 billion in 2015. The falloff was largely due to the lack of a megadeal such as the US$3.3 billion buyout of publicly traded WuXi PharmaTech that dominated 2015. The few mega scale assets that became available in 2016 went to corporate buyers. That said, underlying momentum was strong, with 10 buyouts last year valued at more than US$100 million and an additional US$700 million of the region’s capital was deployed in private investments in public equities.

PE investors continue to find Asia-Pacific’s demographics promising supported by both a growing and aging population, an expanding middle-class and rising burden of both chronic and communicable diseases. This resurgence in deal activity across the region was led by the provider sector, with 31 provider deals in 2016, about three times the number in 2015.

“Healthcare is becoming a go to destination for financial investors in Asia Pacific” said Vikram Kapur, Bain partner and leader of the firms APAC Healthcare practice. “The attractive fundamentals of the sector are bolstered by the fact that, today, assets in the region are reaching the scale that gets more and more PE investors to take notice.”

So what should we expect this year?

“Investors can expect more volatility in 2017,” said Nirad Jain, a partner in Bain’s Global Healthcare and Private Equity Practices and the report’s co-author. “As the turmoil continues, so too will the attractiveness of healthcare as a safe-haven investment. With an aging and ailing global population, demand for healthcare services will rise regardless of whether there are economic headwinds, tailwinds or crosswinds. But, that’s not to say all healthcare investors will have smooth sailing – sky-high valuations for healthcare assets mean that there are choppy waters to navigate.”

In this environment, deal makers will need to continue to be creative and look harder to find targets that have the capacity to deliver meaningful returns.

“In Asia Pacific, the coming of age of assets and growing competition from PE and corporates will continue to raise the bar for investors and they will need to think hard about the differential value add they can bring to targets beyond growth capital” added Kapur.