Lombard Odier’s Johan Utterman invests for a new, older, age
As the world ages, new investment opportunities are opening up in the area of global equities argues Lombard Odier manager Johan Utterman.
Johan Utterman, manager of the Lombard Odier Golden Age fund, has said that the investment opportunities unleashed by population ageing should be seen as a sustainable and profitable theme for the long term.
The fund, launched in November 2009, invests in equities globally that are seen to benefit as populations grow older. This creates both income and growth opportunities as older people seek out products and services in sectors such as leisure and healthcare.
Companies supplying the products and services benefit because populations in developed markets are turning 65 or older faster than young people are being born, and they often have more wealth and disposable income to hand. This means faster growth and better cashflow prospects for the affected companies.
The wealth also means that as consumers, the elderly are likely to look for brands that have better pricing power because they are often seen as providing luxury goods and services. Cruise lines, recreational vehicles (RVs), cruiser or touring style motorcycles (Harley Davidson), designer eyewear, cosmetics and luxury goods such as Cartier watches, and auction houses such as Sotheby’s are examples of areas where the fund has sought out exposure.
Healthcare offers other opportunities. This may include care home operators or dentistry equipment providers. Certain pharmaceutical firms are in particular sweet spots: Novo Nordisk, the Danish maker of insulin treatments for diabetes is benefiting from not only ageing in developed markets, but also ageing and dietary changes in emerging markets too.
These types of global equity opportunities are growing faster than the market generally, and in a sustainable way, Utterman said.
On the growth prospects, he said that it can be viewed in two ways: either as a core proposition – the companies less affected by business cycles, such as pharmaceutical firms providing cancer or diabetes solutions – or the stocks that are more sensitive to market changes, such as financials or consumer stocks. It is the latter stocks, more sensitive to cyclical impact, that would be used more for trading purposes, Utterman said.
Either way, cashflow remains important, and there is a considerable amount of analysis that goes into finding the most suitable companies. Sometimes the growth prospects are sustainable, but the valuations make them less attractive.