The Silver Economy opportunity

One of the current realities across the globe is that the world’s senior population is rising fast and will continue to rise over the years to come. This will likely create plenty of challenges, but also a host of opportunities for companies embracing them.

In the medical side, companies are reporting strong growth in demand for medications used to treat age-related conditions. At the same time, the demand for senior housing and care facilities is relentless. In the insurance field, strong performance of offerings related to health and life insurance has been observed. Moreover, recent volume trends in the cruise industry as well as in health and beauty-oriented consumer companies have also been noticed. All of this can be attributed thanks to the rise of the ‘Silver Economy’.

As societies grow older, their healthcare needs and expenditure increase significantly. For example, the Swiss Federal Statistical Office estimates that the average annual healthcare expenditure for a person aged 86 or over is close to CHF 48,000. This is three times as much as the average of CHF 16,000 for a person in the 66–85 age bracket. (see image below).

As investors, it is very important that we try to identify trends in their early stages so as to profit as much as possible.

Today I wanted to share with you a couple of ETF options which might be interesting in this context:

Insurance

As people grow older, their insurance costs increase and with the rise of ageing population contributions to this sector should continue to rise.

iShares STOXX Europe 600 Insurance UCITS ETF (DE) DE000A0H08K7 (EUR)

This ETF generated an annualized return of 11.50% over a 5-year period. In comparison, the generic Stoxx 600 index generated an annualized return of 5% over the same period.

Healthcare

The incidence of many chronic diseases increases with age, which is why a larger elderly population is tied to a disproportionate rise in healthcare expenditure. Healthcare companies in the areas of pharmaceuticals, biotechnology or medical devices that address conditions affecting the elderly such as cancer, dementia, heart disease or arthritis, should see an increase in demand from this growing part of the population.

Lyxor MSCI World Health Care TR UCITS ETF - C-EUR (LU0533033238)

This ETF generated an annualized return of 20% over a 5-year period. In comparison, the generic MSCI GLOBAL EQUITY index generated an annualized return of 10% over the same period. That is twice the performance each year!

 

 

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1 - Comment

Filippo Cova - 09 ottobre 16:05 Reply

The "getting older" trend is, in my opinion, the one to bet on!

 

Thanks Chris for the article.