“Soon, and for the first time in human history, people over 65 will outnumber people under five globally.” Thus begins the report Natixis Global Asset Management, a management company with one of the most impressive assets in the sector, on "The impact of population aging on the dynamics of global markets".
Antonio Bottilio, the group's managing director, is convinced that it is necessary to rewrite the rules of investment in view of retirement, and therefore of the need to combine capital protection and growth. The challenge has two sides of the same coin. On the one hand, an ever-increasing aging of the population requires increasing costs for public and private care systems for the elderly. On the other hand, however, a "silver economy" which by 2030 will account for 30% of the GDP of the United States and Japan, is an investment opportunity in the health, consumer and financial sectors: the needs of an elderly population they are certainly different from those of a young people. Indeed, there is a strong connection between aging and chronic diseases such as cardiovascular disease, cancer and diabetes, hip replacement or hearing aid implants. It therefore appears clear that the growth in the average age of the population represents a stimulus to investment for these sectors.
The report then focuses on an analysis of changes in the spending preferences of an elderly population. Basic foods and free time are driving a change in the spending preferences of the over 60s, who are more willing than young people to spend on wellness products, as well as health products. Furthermore, the proximity of the points of sale is once again fundamental in choosing where to buy goods. Out-of-town supermarkets will therefore be less attractive than in the past, and shops in the neighborhood of the house are once again preferred. Finally, e-commerce must also be seen as a growth industry for an aging population. If, in fact, the over 55s have struggled to enter the online market, now they seem to be completely comfortable choosing what they need from their desk at home, and more and more are those who choose to buy from online stores.
Of course, the negative effect of an increasingly old and increasingly long-living population lies in the costs of maintaining welfare and social security systems. Obviously, these will be all the higher the more the countries are devoted to guaranteeing a consistent welfare. From this point of view, however, it must be considered that sectors such as life insurance policies, asset management products and reverse mortgages will need to grow. In fact, the increase in contributions will be the stimulus for the increase in demand for all those services.
“As the over-65s increase at the rate of about 10.000 Americans a day, the generation of so-called baby boomer – i.e. those born between 1946 and 1964 – is faced with the needs of the distribution phase. Having abandoned the primary phase of accumulation – when the favorable economic situation had allowed large quantities of earnings to be invested in savings – the new objective of boomers is to identify assets that generate income, and this trend will have important effects on the capital markets”. With these words David Lafferty, Chief Market Strategist at Natixis Global Asset Management, underlines how it will be essential to identify bond instruments capable of capturing the needs of a growing population sector.
Alongside the financial sphere, the sector that will benefit the most from the progressive aging of the population will be the healthcare sector, from pharmaceutical and biotechnological companies to manufacturers of generic drugs, healthcare facilities and hospitals. The biggest opportunity lies in the hands of drugmakers who can bring innovative medicines to market and enable global distribution, especially for diseases that increase with age – such as cancer, diabetes, heart disease and Alzheimer's.
Closes the report Chris Wallis, President & CEO of Vaughan Nelson Investment Management, who does not see one sector more favored than others in exploiting these market opportunities. What he is convinced of, however, is that wherever there are changes and uncertainties, there are potential opportunities for investors. “There is currently a lot of uncertainty about what will happen to the prices of medical equipment,” says Chris Wallis. Crucially, the numbers will increase as the population ages. So, I think companies that are able to leverage that increase will benefit from an aging population.”
