Each week, a professional investor tells MoneyWeek where he'd put his money now. This week:Johan Utterman, manager, Lombard Odier Golden Age Fund.
Ageing populations are one of the greatest challenges facing society today. By 2050, almost 25% of Britain's population will be aged 60 or over, up from 17% in 2011. And in developed markets in general, the cohort of over-65s is growing three times faster than younger generations. Yet this is also a great opportunity for investors. People retiring today are far more willing and able than past generations to spend money on themselves. In the UK, nearly two million of the over-60s have more than £1m in total wealth (including property). By the endof this decade, the spending power of this group across global markets is expected to rise to $15trn.
The opportunity is already huge 70% of disposable income in America is in the hands of the over-50s. In all, the over-60s represent a growing, cash-rich group of consumers, who are less sensitive to the economic backdrop than the rest of the population. That's why businesses serving older people should grow faster and more sustainably than others.
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The so-called 'boomers' are also more active and fun-seeking than previous retirees. They indulge their pets, treating them more like grandchildren. They watch 174 hours of television a month, 63% more than millennials (18- to 34-year-olds). And the peak age for buying a vehicle in America is now 55 to 64, having previously been 35 to 54.
So if you want to profit from ageing, think beyond health care look at cruise lines, holiday resort chains, casinos, cosmetics firms serving older consumers or dedicated retirement financial planners, such as St James's Place (LSE: STJ).
Older people need advice on how to protect and grow their wealth. The "aged affluent" want to supplement their pensions with other revenue streams, often by investing part of their savings. In a world increasingly moving towards online financial services,St James's Place continues to offer face-to-face advice to individuals with £50,000 to £5m at their disposal, which is primarily the over-50s. It continues to grow its assets under management and we expect this to continue given recent changes to pensions rules.
Allergan (NYSE: AGN) is my next pick, following its merger with Actavis. It's the perfect play on an ageing population half of its sales come from Botox, for facial wrinkles, and the other half from pharmaceuticals that treat age-related eye diseases. Actavis is growing more than twice as fast as the market and yet trades at a discount.
We also look at Japan to identify the sortsof firms that benefit most from this demographic trend. Japan is around 35 years ahead of the UK when it comes to ageing, so Japanese companies have a head start in turning their products and services towards older customers. Pola Orbis (Tokyo: 4927)is successfully selling anti-wrinkle cream to older Japanese women. Even at $700 a pop,it's flying off the shelves.
Another interesting trend is technological innovation. We're paying close attention to Google X, Google's research arm whose "moonshot" projects target revolutionary breakthroughs. These include a smart contact lens it's co-developing with Novartis's Alcon which measures blood glucose in diabetics. We hope some of the firm's projects will be spun-off into separate publicly traded firms.
Johan Utterman is manager of the Golden Age fund at Lombard Odier Investment Managers.
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