Aging Population Will Create Opportunities for Institutional Investors

While the retirement industry worries that increasing longevity will affect retirement plans for many individuals—in what could be negative ways—research from PGIM suggests aging populations worldwide will create investment opportunities across real estate, health care, and technology.

The report, “A Silver Lining: The Investment Implications of an Aging World,” urges institutional investors to consider how a graying world could impact their portfolios. 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 health care and technology.

Real estate represents more than 40% of the gross assets of households ages 65 and older 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, North Carolina; Nashville, Tennessee; 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% 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 startups, established medical companies, and research centers that typically cluster around universities.

According to PGIM, health care and technology will grow substantially, driven by people older than 85 who spend four times as much on health care as those ages 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, says, “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.”

More than 30 PGIM and Prudential Financial experts gathered 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. For more details and to download a copy of the report, visit www.PGIM.com/silverlining.