WAYS TO PLAY
The theme is defensive as demand for products and services by this demographic will remain, no matter how healthy the economy is.
“So we believe the theme can work when things are looking up and it also works when things do not look that great anymore,” Gaugler says.
“Companies that play the ageing demographic trend benefit more from structural growth drivers and are less dependent on cyclical growth, which means that even if fundamentals and global economic growth doesn’t look rosy anymore, and at some point it won’t, they stand a good chance to whether that storm better,” she adds.
Gaugler is optimistic that the fund can profit from strong markets and strong fundamentals, but if the market should turn more cautious or the underlying growth shows signs of slowing down, it is a strategy that might be well positioned to weather that storm.
The obvious target for investors looking for exposure to this theme is healthcare. There is an array of aliments and chronic diseases linked to old age including arthritis, cancer and dementia. The issue, however, is that these people don’t pay their own bills.
So Gaugler’s strategy is to target companies that provide services that are paid for by the patient.
The fund also looks for companies that reduce costs by protecting people from certain illnesses or enables a patient to take one pill instead of four. The goal here is to help people spend less time in hospital by getting them out of bed sooner or avoiding a stay on a ward altogether. These are the innovations that attract the attention of insurers and healthcare systems around the world.
Such companies could be developing a technological device or adding artificial intelligence into healthcare, such as a more efficient IT system or even robotic nurses and surgeons.
Retirees today are not conforming to the stereotype of keeping their cash in a mattress. They are using banks, wealth managers, asset managers and life insurers to invest their savings to maintain their standards of living, to generate the cash needed to pay for the cruises, golf club memberships, holiday homes in Spain and the fine dining.
Old age has never looked better. People are living longer and are enjoying their twilight years to the full and, while it could put more longevity risk on pension fund trustees, it has also created a vibrant market for investors to monitor.
Pension funds need to make sure that they are benefiting from the upside of this trend and are not just liable for the downside.
