Why ageing demographics matter

For the first time in human history, there will be more people aged 60+ than children under the age of 10 by 2030. The reasons for this include a lower fertility rate, a decreasing mortality rate across all age groups, an improving standard of medical treatments, and changing lifestyles and diets. This has massive implications for healthcare, tourism, insurance and governments.

Whenever the question of ageing population is raised, we would invariably think of Japan and Western Europe. However, in absolute terms it is the rapidly developing economies like China and India that are home to the world’s greatest share of senior citizens. In fact, nearly two-thirds of the world’s people aged 60+ live in developing countries today. Their global share, according to the United Nations, should grow even further to reach 80% by 2050.

With people living longer, the frailty and different healthcare requirements of older people, together with their different lifestyles, will continue to create extra demand in certain segments of the global economy, particularly for companies providing goods and services that can help senior citizens to maintain a healthy and happy lifestyle.

We believe that increasing longevity thus creates opportunities for investors in a number of areas, namely: medical and health care, elderly care, leisure, consumer goods and financial planning.

Medical and health care
We should continue to see a growing demand for medical and health care services for the aged given their greater propensity to contract various diseases and other age-related conditions. The costs associated with the major diseases facing the elderly - dementia and Alzheimer’s disease, cardiovascular, cancer, arthritis, diabetes and respiratory diseases - have significant social and economic ramifications. In fact, the World Health Organization estimates that global healthcare spending should reach USD 10 trillion by 2022, driven primarily by the elderly who account for nearly three-quarters of the total amount.

Share of US population and healthcare spending by age group in 2017 Source: US Centers for Medicare & Medicaid Services, Peterson-Kaiser Health System, Julius Baer Next Generation Research

Elderly care
Due to their increasingly restricted mobility as well as a decline in their physical and cognitive functioning, the majority of elderly people need some sort of assistance in their daily lives. This creates demand for products such as grab bars in bathrooms, wheelchair ramps, chairlifts, meal boxes and supplements, and adult diapers. For instance, Japan is already selling more diapers to adults than to babies, and China and India should also see an uptake in the sale of adult diapers in their countries.

Leisure
The long-term outlook for the age-related leisure segment should remain bright. This is because leisure increasingly becomes an important priority as people lead longer and healthier lives. Key investment areas include cruise tourism and gaming. Although today’s global cruise market remains largely driven by demand from the US and Europe, it is progressively supported by the elderly Chinese tourists preferring to experience foreign cultures via a relaxing mode of travel. The gaming sector is also popular among the elderly, given that 65% of the sector’s revenues are generated from the 55+ age cohort in the US.

Consumer goods
The spending power of retired and elderly consumers is set to grow from USD 8 trillion in 2010 to USD 22 trillion in 2025, driven primarily by greater disposable incomes. In particular, we believe that anti-ageing beauty products are an attractive investment area, as fighting the physical signs of ageing has become more and more important for the old and young alike.

Financial planning
Extended longevity also has a meaningful impact on insurance and governments, since longer lifespans increase the likelihood that we will outlive our state-sponsored pensions. Already today, two out of five people in the world have to rely on their savings to some extent to fund their retirement. It is for this reason that insurance companies offering savings-and-protection services and products should benefit from the looming silver wave.

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