An ageing population is an investment opportunity

Demographic trends carry implications for charity portolios, says Nicola Donnelly of Wheb Asset Management

It was refreshing, if surprising, to hear that a politician is giving serious thought to an issue beyond the next election.

I am referring to the new book by David Willetts, a Tory MP, on the ageing population and its implications for our society. His focus is on how older people are accumulating proportionately more wealth than ever before, whereas younger people have little chance of doing nearly as well. He says our elders have left us to pick up the bill for the cost of climate change and the bailing out of the financial sector.

Like politicians, fund managers should be thinking about the changing demographic trends and their implications for their clients' portfolios.

At Wheb, the ageing population is one of our three major investment themes, the others being climate change and water scarcity. There are some very salient issues for politicians to address in the developed world, and companies that are positioned to provide solutions to these problems will do extremely well.

First, people over the age of 85 use nine times more healthcare than people under the age of 65. Second, half the population of the UK is over the age of 40 and holds about 85 per cent of its financial assets. Third, while previous generations built sewage systems and railways for subsequent generations, some would argue that the baby boomers have not created much during this prolonged period of wealth generation.

We seek to invest in a range of companies that address the need for more healthcare. One example is Zimmer, an orthopaedics company that stands to benefit from a global hip and knee replacement market that was worth $11bn in 2008.

We also look for companies that will benefit from increased levels of disposable wealth among the elderly, especially during a time when the value of their savings is likely to rise while younger consumers are struggling to pay off debts. One such company is Amplifon, a hearing aid company, which we think could have revenue growth of about 30 per cent a year because of the increasing number of wealthy elderly people who are choosing to buy higher-quality hearing aids.

Many companies are excited by the challenges posed by demographic shifts and are positioning their businesses accordingly. They will be rewarded in the long term by superior growth rates and new opportunities. Sadly, Mr Willetts remains an exception among politicians, who are more interested in opinion polls than addressing this monumental issue.

 

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