Aging populations worldwide will create investment opportunities across real estate, healthcare, and technology, according to research released today by PGIM, the $963 billion global investment management businesses of Prudential Financial, Inc. (NYSE:PRU).
A Silver Lining: The Investment Implications of an Aging World urges institutional investors to consider how a graying world could impact their portfolios. The focus on the longevity megatrend follows PGIM’s recent examination of the urbanization megatrend in The Wealth of Cities.
“As chief investment officers take a long-term strategic view across their portfolios, it will be increasingly important to evaluate how to capture the benefits of secular trends such as aging and urbanization,” said David Hunt, PGIM’s president and CEO. “We gathered over 30 PGIM and Prudential experts to debate the most attractive investment themes arising from the longevity megatrend and to identify the likely winners and losers across different sectors in the economy.”
Global aging will reshape consumer spending for decades to come, according to the report. These changes will not only impact developed markets but also have a far-reaching effect on emerging markets, home to two-thirds of the world’s elderly. In particular, the report calls attention to evolving opportunities set within real estate and new opportunities within healthcare and technology, as follows:
- Real Estate represents more than 40 percent of the gross assets of 65+ households in major developed markets like the U.S. and the U.K., and aging populations will reshape demand in the sector, along three key investment themes:
- From homes to condos: In the U.S., as an example, Baby Boomers are discovering the appeal of active urban lifestyles and creating demand for centrally located condos in cities like Raleigh, N.C.; Nashville, Tenn.; Austin, Texas; and Atlanta.
- Senior housing: Demand for senior housing in the U.S. alone will surge by 850,000 new units by 2030, a 75 percent increase from 2010, according to Senior Housing Analytics. Other nations, like the U.K., Japan, and China, are also straining to meet demand.
- Eds and Meds: A silver tsunami brings with it a host of age-related diseases—and a growing industry to treat and cure them. Opportunities exist to invest in the real estate required by biotech start-ups, established medical companies, and research centers that typically cluster around universities.
- Healthcare and Technology will grow substantially, driven by people over 85 who spend four times as much on healthcare as those aged 45 to 64, leading to two key investment themes:
- Pharmaceutical and biotech firms: Investors can find focused opportunities among venture capital firms whose operating companies target diseases such as dementia, stroke, cancer, Alzheimer’s, and Parkinson’s. Mid- and late-stage pharma-focused private equity also plays a role.
- Silvertech: A new wave of businesses are emerging that create, distribute, and use technology-enabled medical services and devices to help seniors live more independently, including providing solutions for chronic care, enhancing mobility, and improving delivery of medical care.
Taimur Hyat, PGIM’s chief strategy officer, said, “For the first time in recorded history, the old will outnumber the young. Our report demonstrates the profound impact global aging will have on individuals, businesses, governments, and investors around the world. Long-term institutional investors should holistically evaluate the longevity megatrend and consider capitalizing on the opportunities it will bring.”