Golden years

  • Tweet
  • Share on LinkedIn
  • Share via email
  • Print
  • Download

June 21, 2021


Four key themes underpin the current generational change towards an older, yet healthier world population, says Newton portfolio manager Yuko Takano.

Some surprising facts about aging:

  • At US$59 trillion, US baby boomers hold more than ten times as much money as the amount held by a comparative number of US Millennials. (Source: Visual Capitalist, US Federal Reserve, accessed June 7, 2021)
  • In the US, over-55s accounted for more than 40% of all consumer spending in 2018 (up from 27% in 1988). (Source: BLS; Newton Investment Management analysis, 2019.)
  • In China, the number of over- 60s is projected to increase from 214.7m in 2015 to 361.6m by 2030. To put that into some kind of context, by 2030 there will be more Chinese people over 60 than people living in the US.

Old age is opportunity dressed in different clothes.1 So goes one saying about getting old – and for the current generation of septua-, octo- and nonagenarians that certainly rings true.

Today, many of the physical and cognitive limitations traditionally associated with increased longevity are in retreat. Chronic diseases – particularly those linked to lifestyle choices – can be prevented, lessened, or managed. Gene therapy and other medical advances (note the recent US FDA approval of a new treatment for Alzheimer’s, for instance) are also helping to write a new chapter in elderly healthcare.

In many parts of the world, today’s oldsters are wealthier too. With baby boomers estimated to control more than half of US household wealth2, the Dickensian stereotype of superannuated scrimping and saving is long gone.

So what does this mean for investors? For Takano, the story is overwhelmingly a positive one, with structural tailwinds playing a large part in the narrative.

The chief of these, she notes, is how life expectancy will continue to climb in the coming decades. Consider the following:

  • The average life expectancy across both sexes had risen from 53 years in 1960 to 72 by 2016.
  • Forecasting out to 2030, it is probable that male and female life expectancies will grow further to 80 and 83 years, respectively.
  • Life expectancies have increased across all income groups globally as health care becomes more accessible and affordable.
  • Meanwhile, global fertility rates have fallen from a high of five children per woman between 1950 and 1955, to less than 1.9 children per woman today.

To respond to this picture of an older, yet healthier, world population, Takano highlights four core themes she believes will play well now and in the decades ahead: care and support, financial security, health innovation and living better.

Care and support

On the first of these sub-themes, Takano points to a plethora of opportunities in community, hospital and longer-term care settings designed to improve wellbeing for older people.

“We’re likely to see an 86% increase in the number of care-home places needed in the UK to accommodate what is among the most advanced aged populations,” she notes. “Total public spending on longer-term care currently accounts for around 1.6% of GDP on average across the OECD3; but by 2060 we believe this could nearly double to 2.8%.”

Takano notes the US is one of the most mature markets, with 40% of all over-65s likely to enter some form of care home or assisted living; this compares to the OECD average of just 12%. “With the global senior housing/nursing home market estimated to be valued at around US$438.5bn, we expect the total addressable market to grow in coming years,” she adds.

Live long and prosper

Finance is another area of expected growth, according to Takano. “As populations age, financial-planning solutions will become increasingly important for retirement provision, health-care financing, intergenerational wealth transfer, and funding leisure pursuits in retirement,” she notes.

Here, a large and expanding savings gap – not just in developed markets but in emerging economies too – will be a catalyst. With global dependency ratios4 continuing to climb as society ages, the onus will then be on private life and health insurers to allocate capital towards preventative care, while wealth managers will have a key role in offering effective full life-cycle planning products.

“More mature end-markets are already committing significant capital to private savings solutions but there’s also huge growth potential among developing economies as incomes per head continue to climb,” says Takano. “Insurance penetration is significantly lower in parts of Asia than in developed markets – 2.4% across Asia relative to the 7.5% penetration in Europe – though this is set to expand.”

Innovation in health care

The third sub-theme highlighted by the Takano captures those companies with exposure to emerging trends in innovative medicines, devices and diagnostics, data-driven personalized care, regenerative medicines and services, and robotics.

“Focusing on regenerative medicines, more solutions are in development that offer the potential for improved vision, pain management and easier mobility – an important requirement for an aging population,” Takano notes. “We estimate the global regenerative medicine market could be valued at US$66bn by 2022, with an annualized growth rate of 20% or more.”

A design for life

The fourth and final theme focuses on quality of life. Here, the rise of the silver dollar (the spending power of older cohorts) will be the driving force, with senior citizen fun and self-fulfillment the overriding goals.

“In the US, 90% of the growth in the time spent in sports and outdoor activities will come from those aged over 65 – unburdened by work, retirees have more money and time to spend on leisure activities,” concludes Takano. “Companies in the home improvement and renovation space could also experience tailwinds from increased spend by pensioners who wish to ‘age in place’ rather than move to retirement homes.”

1 “For age is opportunity no less
“Than youth itself, though in another dress,
“And as the evening twilight fades away
“The sky is filled with stars, invisible by day.”
Morituri Salutamas ― Henry Wadsworth Longfellow

2 Source: Visual Capitalist, US Federal Reserve, accessed 7 June 2021

3 Organization for Economic Co-operation and Development, an association of 36 developed and developing countries dedicated to global economic development.

All investments involve some level of risk, including loss of principal. Certain investments have specific or unique risks. No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment.

Recent market risks include pandemic risks related to COVID-19. The effects of COVID-19 have contributed to increased volatility in global markets and will likely affect certain countries, companies, industries and market sectors more dramatically than others.

This material has been provided for informational purposes only and should not be construed as investment advice or a recommendation of any particular investment product, strategy, investment manager or account arrangement, and should not serve as a primary basis for investment decisions. Prospective investors should consult a legal, tax or financial professional in order to determine whether any investment product, strategy or service is appropriate for their particular circumstances. Views expressed are those of the author stated and do not reflect views of other managers or the firm overall. Views are current as of the date of this publication and subject to change. This information contains projections or other forward-looking statements regarding future events, targets or expectations, and is only current as of the date indicated. There is no assurance that such events or expectations will be achieved, and actual results may be significantly different from that shown here. The information is based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons. References to specific securities, asset classes and financial markets are for illustrative purposes only and are not intended to be and should not be interpreted as recommendations. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

"Newton" and/or the "Newton Investment Management" brand refers to Newton Investment Management Limited. Newton is incorporated in the United Kingdom (Registered in England no. 1371973) and is authorized and regulated by the Financial Conduct Authority in the conduct of investment business. Newton is a subsidiary of The Bank of New York Mellon Corporation. Newton is registered with the SEC in the United States of America as an investment adviser under the Investment Advisers Act of 1940. Newton's investment business is described in Form ADV, Part 1 and 2, which can be obtained from the website or obtained upon request. BNY Mellon Investment Management is one of the world’s leading investment management organizations, encompassing BNY Mellon’s affiliated investment management firms and global distribution companies. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation and may also be used as a generic term to reference the corporation as a whole or its various subsidiaries generally.

No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission.

© 2021 BNY Mellon Securities Corporation, distributor, 240 Greenwich Street, 9th Floor, New York NY, 10286

Not FDIC-Insured | No Bank Guarantee | May Lose Value