How can you invest in an ageing population?

The news broke globally at the end of 2015: after 35 years, China kissed its controversial birth policy goodbye. From 1980 onwards it was prohibited to raise more than one child per family (although there were exceptions). According to the authorities, these measures were necessary in order to keep population growth manageable. Strikingly, after abolishing the one-child policy, the government rapidly began a campaign to...encourage larger families. Today, the “target” is to have as many as three children per family. This is a remarkable change of direction, albeit one that was desperately needed. The fact is that if the Chinese spend all their nights sleeping, the population will shrink sharply in the next few decades. According to current projections, by 2100 the number of Chinese people would be just over half as many as today. A falling birth rate is not a problem exclusive to China or Europe. Brazil, Mexico, Argentina, Turkey, Thailand, Bangladesh, Australia, Canada, the US, Japan, South Korea...in these countries and many others, fertility – as in the expected number of children a woman will have – has dropped below the 2.1 threshold. A level of 2.1 is the level needed to maintain a stable national population without immigration . Good to know is that while various countries have a shortage of children, the falling birth rate is not a universal phenomenon. Over the next few decades, the world’s population will still increase by 2 billion, of which more than half will be in Africa.

Fifty shades of grey

A falling birth rate naturally goes hand in hand with the other demographic change: ageing. In 2000, the ratio of the working population (20–64 years) to senior citizens (65 years and older) worldwide was 100 to 12.8. Today, that ratio has shifted to 100 to 18, and projections suggest that by 2070 it will be 100 to 36.4. This trend is particularly prominent in Europe and North America, where it is predicted that by 2070 there will be 56 senior citizens for every 100 workers. It is not just that the number of people over 65 not is growing; they are also growing older, thanks to an increasing life expectancy. If you were born in Europe in 1900, you had a life expectancy at birth of less than 43 years. Today, it stands at more than 77 years . People are living longer than ever before, not only in industrialised countries, but also in developing countries. In 1900, life expectancy at birth worldwide was 32 years. Today, this has more than doubled to 73 years.

Ageing brings opportunities for investors

The ageing population will have a profound impact on individuals, companies and governments. Pensioners will be responsible for an ever-growing proportion of global wealth and spending. Consumption patterns will change as a result, and companies will have to take greater account of this. Meanwhile, governments will face higher pension and healthcare costs. Ageing is a phenomenon that is now affecting both industrialised and emerging markets, and the trend is accelerating. However, this unprecedented global demographic shift brings not only challenges, but also opportunities for investors.

Real estate

Given an increasing number of elderly people, there is a growing demand for homes adapted to their specific needs. This means a growing market for retirement homes, nursing homes and accessible housing. At the same time, the downsizing trend, where older people seek out smaller, maintenance-friendly homes, is creating opportunities in the real estate market.

Health care sector

The health and well-being sector will also be facing busy times due to the ageing population. An ageing population means a higher demand for medical services, medication and health technology. This brings opportunities for investment in pharmaceutical companies, biotechnology, medical equipment and healthcare facilities.

Leisure time

Many retired people have the time, money and health to engage in a wide range of leisure activities. This includes travel, sports, entertainment, hobby-related products and educational services. The demand for age-friendly and accessible leisure activities is expected to increase.

Automation

The ageing population may lead to labour shortages, indirectly increasing demand for automation and AI applications. Companies that offer innovative solutions for automation in manufacturing, the service sector, and even home care for the elderly may offer an investment opportunity. These technologies can help increase efficiency and reduce dependence on human labour, which may be critical in a world with a shrinking workforce.

Financial services

Finally, the financial sector offers opportunities in an ageing society. The prospect of a longer pension period creates a strong incentive to save, especially in countries where publicly funded safety nets are limited in scope. Older people need specific financial services including pension planning, asset management, and inheritance planning. Financial institutions and consultancies that specialise in services for senior citizens may be well positioned to take advantage of this growing market.

How can you invest in the ageing population?

Investing in ageing can be managed in various different ways. Which of these suits you will depend on your risk appetite, knowledge of the area and how much time you want to spend on your investments. ● Themed investment funds: there are investment funds that specifically focus on population ageing. These funds invest in a portfolio of companies that are active in healthcare, housing for seniors, leisure activities and/or other industries that make money from the ageing population. The advantage of these funds is that they offer diversification within the area. ● Thematic ETFs (Exchange Traded Funds) or trackers: these products track the performance of an index composed of companies that benefit from an ageing population. This can be a cost-effective way to gain exposure to this trend. ● Individual equities: for the more experienced investor, direct investment in individual companies that are active in healthcare, housing for seniors, leisure activities and/or other industries that benefit from an ageing population may be attractive. However, this requires in-depth knowledge of the market and the ability to pick the right companies.

Are you looking for trackers or funds that focus on ageing?

● Log in to Keytradebank.be on your laptop or desktop ● Click on Advanced at the top of the screen, then ask to search by instrument name, symbol or ISIN ● Tick Tracker and/or Fund ● Search for the term ageing