For the first time in history, there are more people on Earth over the age of 60 than under the age of five. As society ages, health care and finance are likely to enter a "silver" era Economy offer interesting investment opportunities, says Eva Maria Hintner of Columbia Threadneedle Investments.
For the first time in history, there are more people on Earth over the age of 60 than under the age of five. In many countries today, people can expect to live to 60 or older. In 2018, there were 125 million people worldwide who were 80 or older. By 2050, according to the World Health Organization (WHO), there will be nearly as many people over the age of 80 in China alone, 120 million. The overwhelming majority (80%) of older people will live in low- to middle-income countries in 2050.
Scientists warn of stagnation
With such aging society figures, economists generally worry about economic stagnation. That's because there are fewer and fewer new workers to increase production. "But some sectors of the economy could benefit from this aging of the people. Which? Well, freedom in old age depends quite significantly on two factors: the health and the financial situation", says Eva Maria Hintner, Country Head Switzerland at Columbia Threadneedle Investments.
For example, health care spending is expected to exceed GDP growth in the decade to 2030, according to forecasts by the Organization for Economic Cooperation and Development (OECD), mainly due to increasing life expectancy in developing countries. Looking at financial products for retirement, pension fund assets are expected to reach a level of 61.1 trillion by 2023, according to the OECD. USD, while in 2018 they will still amount to 42.2 trio. USD, according to the Association of the Luxembourg Fund Industry. As a result, the healthcare and financial sectors are likely to be in a "silver bullet." Economics even offer better investment opportunities.
Golden age for pharma companies dawning
"In healthcare, the outlook for pharma companies could hardly be better", Hintner says. Aging population fuels demand for medicines. At the same time, new technologies such as genomics are driving innovation. This has ushered in a golden age for drug discovery, he said. For example, there are now many new breakthrough drugs for diseases that increasingly afflict the elderly, such as lung and blood cancers, diabetes and multiple sclerosis. There are also promising drug candidates in the development pipeline today for rare diseases such as obesity. This dynamic continues to gain momentum.
Health technology is another area that the aging population is favoring. All over the world, overburdened hospitals are looking for ways to become more efficient. Technology can help them ease the pressure. For example, ward rounds, as they used to be done, may soon be a thing of the past. For example, one company has developed central monitors that can be used to monitor patients in intensive care units. This allows a single healthcare professional to monitor all monitors simultaneously and intervene immediately if patients need help.
The need for financial retirement planning is growing
That people need to save more for a longer retirement is widely recognized. In China, for example, the rapid aging of the population has led society to consider how to care for the elderly. As a result, the financial retirement market is set to be commercialized. As a result, according to a recent report by McKinsey& Company growth opportunities will result for financial services companies. "Although China is a special case due to its size and demographics, other developed and developing countries face similar challenges", Hintner says.
The insurance industry is another beneficiary of this development. As older people take out various insurance policies, from travel to life policies. Columbia Threadneedle's Swiss country head cites two examples from Asia: Thailand is seeing a rapid increase in the number of older people. According to Thailand's Office of Insurance Commission, the Thai life insurance industry was expected to grow by 5% to 6% between 2018 and 2019. China's life insurance market grew even faster in 2019, up an impressive 15.9%, according to data from Swiss Re Sigma. (EY: "2020 China insurance outlook")
"There is no doubt that as the global population ages, so does the possibility of economic stagnation. At the same time, even in a 'silver' economy, there are likely to continue to be growth areas. At a time when the global economy is facing extreme challenges due to the aftermath of the Corona pandemic, select healthcare and financial companies in particular are also likely to benefit from a much stronger long-term push", Hintner concludes.