Capturing Next Generation Trends: Longevity

By 2030, for the first time in human history, the number of people aged 60 and above is expected to surpass the number of children under 10. 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.

While increasing longevity is obvious in developed countries like Japan, for example, where 33.4% of the population is over the age of 60 and only 9% is under 10, the trend is also prevalent in developing countries. In fact, developing countries are home to nearly two-thirds of the world’s over-60 population. The increasing number of older people in society is and will continue to be a burden on the infrastructure, such as healthcare systems, in both developed and developing countries.

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: healthcare, elderly care, leisure, consumer goods and financial planning.

The longer people live, the more likely they are to contract diseases and/or suffer from various age-related conditions. The three leading causes of death are cardiovascular diseases, cancer and respiratory diseases. Other major issues faced by the elderly include dementia and Alzheimer’s disease, arthritis, diabetes, hearing loss, and dental and eye problems. The chart below shows that in 2017, the 60+ age group represented a more than proportionate share of US healthcare spending. According to the World Health Organisation, global healthcare spending is projected to reach USD 10 trillion by 2022 and spending by the elderly is expected to account for nearly 75% of this 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.

As people live longer and healthier lives but usually stop working at a certain age, demand in the older-age leisure segment is set to rise. In particular, we expect the cruise and gaming industries to benefit. The Cruise Lines International Association (CLIA), the world’s largest cruise industry trade association, reported that 48% of US cruise passengers are aged 50 or above. In the gaming industry, the older generations have traditionally been the largest market and this is likely to remain the case with the rapid expansion of marketing towards the greying population.

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
Deciding to retire of course means that any regular income from working ceases to be received. Thus, this is a very significant decision to make and certainly requires careful financial planning. This is particularly pertinent for those living in countries where social security is less than adequate. For people who do not receive a pension through a defined benefit plan, the longevity risk, the risk that the funds in their pension or savings plans are not sufficient to cover their costs until they die, is borne by the individuals. As the demand and education for personal investments grow and more sophisticated investment products become readily available, we believe that the onus on individuals to plan and save for their own retirement is increasing. We therefore believe that financial institutions that can manage assets for such individuals are well-positioned to benefit.

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