The fountain of youth will spout money for investors
Life expectancy has doubled in just a few generations, and the trend will continue, Jim Mellon tells Merryn Somerset Webb. That’s an opportunity for investors.
Life expectancy has doubled in just a few generations, and the trend will continue, Jim Mellon tells Merryn Somerset Webb. That's an opportunity for investors.
Want to live forever? I'm not sure I do either. How about 100? I guess the answer is yes, as long as you could be sure of being pretty healthy to the end. If so, I have a book you should read Juvenescence: Investing in the Age of Longevity, by Jim Mellon and Al Chalabi. It's their second book (the other is Fast Forward) and Mellon reckons it outlines not just the "biggest money fountain idea that Al and I have ever seen", but also the ten or so things we can do to boost our odds of getting to 95 to 100 in good health, and the science that will one day take us to 150 in the same state.
But aren't life-expectancy gains coming to an end as our lifestyles push us on average to die a little younger than we were? Mellon reckons this is a very short-term blip. Life expectancy has doubled in a couple of generations. Much of this has been due to environmental rather than purely medical factors. Sanitation has hugely improved; smoking is becoming a minority activity; the use of antibiotics is widespread; and the national diet has improved. A century ago, infections and accidents carried swathes of people off in a matter of days. Today, only about 20% of deaths in the UK are sudden or unexpected the majority (60%) "happen after years of illness and intermittent recovery".
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The quest for near-immortality
There's more of this to come. Smoking (which, emphasies Mellon, is the most dangerous thing you can do) is still in decline; obesity and fitness awareness is growing (expect to see widespread tobacco-style super taxes on sugar in the next decade); our new-ish understanding of the human genome and the structure of DNA has given us the ability to battle many common diseases; and wearable technology is about to make diagnostics for most common diseases easier and faster. Not long now, says Mellon, and your GP will be no more than a receptionist fronting a diagnostic computer (which will be more accurate than he ever was). "It might not be too long before your smartphone can be used to identify the biochemical residue to cancer cells on your breath", for example.
Scientists are looking at how to "cure or at least tame" diseases that get more prevalent as people age. But they are also starting to research age as a "unitary disease in itself" (in other words, treating ageing as a disease, rather than an inevitable process). The idea is that "biochemical pathways are manipulable and malleable", which means that ageing is not "entropic and inevitable", but treatable. Today's technology can take us to 115 or so; but it is this cellular manipulation and intervention that could end up being used by scientists to create a "time bridge" that will take humans to "lifespans that today seem unimaginable". If a jellyfish can live to 200, a giant tortoise to 255 and an ocean-going quahog (a kind of clam) to 507, why should we "dribble away" at 90?
But what's realistic? I'm in my 40s. I eat pretty well. I manage my 250ml of red wine most days, I take turmeric and probiotics, and I fully intend to start proper regular exercise any day now. Manage the latter, and 110 is a "realistic prospect", says Mellon. And if the technology has moved on to the extent that everyone can have their "fundamental molecular biology" adjusted by the time I am 90-odd, 150 to 200 isn't an unreasonable guess-timate. This makes me a bit tense about my pension. But I'd better get used to the idea, says Mellon.
The upshot of the ideas in Juvenescence is that even without much more progress, by 2045, the over-65s will make up 25% of the UK population (around 19 million people). You'll also see centenarians all over the place. The UK had under 50 of these in the 1920s now we have 15,000. Being 100 is about to be "entirely unremarkable." These people will be reasonably healthy and (hopefully) well off. Their existence will change the way that we look at lifetime consumption patterns (we generally assume people stop consuming much at around 65 or so one blender/car/sofa is enough) and work patterns. This is happening already, of course. Look at who now dominates the home-improvement and travel markets not families, but healthy retirees. No one living to 95 (even public-sector workers) will be able to retire at 55 or 60 and expect it to be job done.
So the over-65s will at the very least be enthusiastic part-time workers (not least because not much of the stuff Mellon describes above comes cheap). That should bring about some interesting discussions about age-related state-funded freebies: if you are healthy and working at 70, what right could you possibly have to a free bus pass? The fact is, says Mellon, that the social contract that dictates the old progression of life "learn, earn, retire, expire" is well on the way to being smashed. The future should at least be flexible.
What to buy and what to avoid
So how do we invest? Because if we are to finance longevity, invest we must. There are lots of obvious ways to get in on the longevity game care homes, retirement villages (McCarthy & Stone being an obvious play here), equity-release providers, cruise lines, private nursing services, asset managers (someone has to help the retired get rid of their extra money), vets (the over-65s are keen on pets) and so on. But Mellon and Chalabi aren't into the boring stuff. There are also some very obvious places not to go, says Mellon. Think the major life insurers. They have written an awful lot of annuity contracts that assume an average age of death of around 90. If it isn't, can they survive? Instead, Mellon is in biotechnology, pharmaceuticals, robotics and medical technology. But this is not an area in which investors can "throw darts at a bull market". The science is "complex and contentious". There will be many, many failures and scandals (think Theranos) amid the flood of listings to come. "Selection is key." Mellon and Chalabi have created three portfolios of public companies with this in mind for the full three, you will have to get the book, but in the box, I look at some of the shares held across the portfolios.
I can't let Mellon go without asking about the rest of the market. There is a view that longevity will push equities higher and higher (the retired will pay anything for income). Mellon doesn't buy it. "Schumpeterian destruction is much more aggressive in the age of acceleration' driven by new technology. Companies will come and go much faster than before; personally, I wouldn't be surprised to see Facebook a shell of its current self in ten years' time." Markets "priced to perfection" rarely stay that way "there is little upside in chasing bubbles". That said, he still likes Japan (his "favourite market"): it isn't priced to perfection. He's keen on gold and silver, on the basis that "inflation is making its insidious way back." The Phillips Curve (which suggests that inflation should rise as unemployment falls) is not dead: it has just been in a "long slumber" from which it is now stirring. "Inflation could really spike in the developed world and soon."
And what about Brexit? Mellon was a keen advocate of leave. Any doubts setting in? None. "Brexit always has been, and will remain a sideshow to Europe's deeper problems. A deal will be done, the UK will start to grow faster, and if our government could think outside of its blinkered box, and institute real reforms, Britain could be the fastest growing country in the G7 by 2020."
How to invest for a longer life
There are three Juvenesence portfolios: conservative, moderate and speculative. The first two both have Swiss pharma giant Novartis (Zurich: NOVN) in them. It's big and diversified, so hardly a pure longevity play, but "through its work within the Novartis Institute for Biomedical Research it appears to be ahead of the curve in trying to understand ageing at a fundamental level". Amgen (Nasdaq: AMGN), Editas Medicine (Nasdaq: EDIT), Juno Theraputics (Nasdaq: JUNO), OxfordBioMedica (LSE: OXB), Bluebird Bio (Nasdaq: BLUE) and Novozymes (Copenhagen: NZYM-B) are also in conservative'' and moderate''. Amgen is a biotech giant with several blockbuster products. It's also one of the few firms in the sector to pay a dividend, making it a "must-have" for the conservative portfolio.
Juno focuses on advanced blood cancers. Its products are seeing impressive clinical success and it is likely to make $1bn in revenue by 2021. Editas is a "leader in gene editing with seemingly good intellectual property" and in a collaboration with Juno, which is also a Mellon favourite, and the top holding in the speculative portfolio. OxfordBioMedica is a spin out from the University of Oxford with a pipeline of treatments for cancer and Parkinson's, as well a partnership with Novartis, and collaborations with GSK and Sanofi. It is in the speculative portfolio. As Mellon says, these are not "buy and hold" portfolios. Technology will move fast (one holding Kite Pharma has already been bought by sector giant Gilead). Mellon and Chalabi plan to keep up with it. As new firms list, they will update their site (Juvenescence-book.com).
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