Lombard Odier explains the benefits of an ageing population
Meret Gaugler co-manager of Lombard Odier Investment Managers’ Golden Age fund explains how to benefit from the ‘ageing affluent’.
Pola Orbis is a Japanese skincare company you may never have heard of. One of its most innovative products is an anti-wrinkle cream for older Japanese women. It retails at $700 a pop.
And it’s flying off the shelves.
Pola is not the only company developing or updating products to cater for the older generation. Harley Davidson, whose average customer age is 50, is rolling out models with heated seating- and reverse gears- to make for a more comfortable ride for older ‘Hog’ fans.
Why? Because baby boomers are big business. In Britain alone, there are almost two million people with £1 million in total wealth, including property. And this demographic is set to expand as people live for longer. By 2050, the number over 65 will be one in four. And the UK is by no means alone in experiencing this demographic phenomenon.
In Japan, over 60s own more than 40% of the country’s privately-owned financial assets. The ‘affluent aged’, having lived through years of surging property prices and strong market returns, have more money to spend in their retirement- on restaurants, international travel, entertainment, more than their children or grandchildren, who will be starting their working lives weighed down by student loans and expensive mortgages.
Indeed, this generation is starting their working lives with declining disposable income, the first time this has happened in almost 100 years.
Wealthy baby boomers are less sensitive to the economic cycle, and downturns, and this, coupled with the fact that the over-60s represent a growing, affluent group of consumers, means that businesses serving their needs will likely grow faster than the rest of the economy.
As we stay healthier for longer, we also want to engage in more fun activities which involve spending money.
So investors who want exposure to this trend should think about stocks that enhance retirement – Saga Group which offers cruises and insurance, fine art dealer Sotheby’s or high end cosmetics companies such as Estee Launder; as well as companies helping seniors to hold back the effect of ageing like Danish hearing-aid manufacturer GN Store Nord. Hearing aids have seen stable demand over the years and we expect this to continue.
And of course, seniors will want advice on how to protect and grow their wealth. One of our plays includes British wealth manager St James’ Place. The ‘aged affluent’ increasingly want to supplement their pensions with additional revenue streams, often by investing part of their savings.
In a world increasingly moving towards internet-delivered financial services, St James’ Place continues to offer face-to-face investment advice to individuals with between £50,000 and £5m at their disposal, which is primarily the over 50s. The company attracted £4.3bn of funds during 2013 and we anticipate this trend will continue following UK’s recent budget and pensions overhaul, particularly with regards to annuities.