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Mar 07, 2019 / News
Investing in the ageing population
You’ve undoubtedly heard that Australians are living longer.
The most recent Intergenerational Report for instance, projected that the number of Australians aged 65 and over would more than double by 2055, compared with 20151.
The Productivity Commission report, An Ageing Australia: Preparing for the Future, has also projected that with continued small increases in longevity, by 2100, it’s estimated that there will be more people aged 100 or more years than babies born in that year2.
But the question still remains – is there opportunity for investors to profit from this trend?
Keeping an older generation fit and healthy requires significant investment in certain areas such as healthcare and technology. Having some exposure in your portfolio to stocks tapped into this sector and their healthcare counterparts, may therefore make sense.
Investing in the healthcare sector
This demographic is likely to have implications and opportunities for investment markets.
Australia’s ageing population will potentially provide tailwinds for decades to come, boosting the demand for drugs, surgeries, medical devices, private hospitals, medical centres and aged-care facilities, as well as services such as nursing, pathology and radiology3.
The stark reality is that Australia’s ageing population brings health issues that drive up care demand and costs. Incidence of ailments such as coronary heart disease (CHD), cerebrovascular disease (stroke), dementia (including Alzheimer’s disease) and lung cancer increase greatly with age4.
It is not just Australia though.
Globally, healthcare spending will grow at 4.1 per cent a year between 2017 and 20215. This indicates that healthcare spend may grow faster than the global economy, as the world population expands and medical treatments increase.
Investment options: the ageing population trend
Global healthcare indexes
One way to gain exposure to the healthcare industry is via exchange-traded funds (ETFs). Several ETF issuers have created vehicles that track global healthcare indices, giving investors access to the world’s largest listed pharmaceutical companies, medical device makers and healthcare stocks.
Be aware, however, that when investing in global markets, you may wish to consider risks such as currency risk as the Australian Dollar appreciates/depreciates against the currency in which the investment is denominated.
Australian Securities Exchange (ASX)
Alternatively, you can choose from a wide variety of local stocks exposed to healthcare. The ASX hosts Australia’s global healthcare stocks including those developing medical devices for sleeping and hearing as well as plasma based therapies. You can also get access to private hospital operators in Australia, some of the biggest in the world.
Possible opportunities in medical research and aged-care
Biotech – medical research
Australian medical research continues to shape the health and wellbeing of our nation, and has also proven to deliver return on investment for the Australian economy6. Investing in Australian biotechnology companies however, may present a level of risk and is generally a longer-term investment proposition. This is because the treatments must pass a number of stages of clinical trials in order to reach federal approval.
Aged-care
The aged-care industry is also one that should benefit from the ageing population and rising spending, and it is well-represented on the stock exchange. However, the stocks have suffered from recent negative publicity concerning care practices, culminating in the announcement in September 2018 of a Royal Commission into the sector.
Stocks tapped into super
Finally, with $2.7 trillion now held in the superannuation system7, the ageing population will increase outflows from this asset pool, as there will be a flow of money funding these years in retirement – although whether every retiree is able to fund a lifestyle to match their expectations cannot be guaranteed.
The point is that the nation will see a growing number of older Australians, healthy enough to enjoy their retirement. As a result, this may provide opportunities for a number of stocks tapped into the sector – less obviously than their healthcare counterparts.
For investors, having some exposure in your portfolio to the healthcare sector and its counterparts, may make sense given our increasing ageing population.
There are a many ways you can get involved in investing – whether it be in or outside your super.
About us
EMFS was formed in 2001 originally to service the financial planning needs of the clients of Nexia Edwards Marshall, Chartered Accountants. In addition, we now service clients referred by other accounting firms, lawyers and clients who are not serviced by Nexia Edwards Marshall. We manage funds totalling about $250m on behalf of clients.
1 - Treasurer of the Commonwealth of Australia – 2015 Intergenerational Report Australia in 2055 p. 1
https://static.treasury.gov.au/uploads/sites/1/2017/06/2015_IGR.pdf
2- Productivity Commission report November 2013 – An Ageing Australia: Preparing for the Future p. 6
https://www.pc.gov.au/research/completed/ageing-australia/ageing-australia.pdf
3- Australian Institute of Health and Welfare 2014. Ageing and the health system: challenges, opportunities and adaptations p 1-7:
https://www.aihw.gov.au/getmedia/19dbc591-b1ef-4485-80ce-029ff66d6930/6_9-health-ageing.pdf.aspx
4 - Deloitte – 2015 Global health care outlook Common goals, competing priorities p. 1-4
https://www2.deloitte.com/gu/en/pages/life-sciences-and-healthcare/articles/2015-health-care-outlook.html
5 - Deloitte – 2018 Global health care outlook: The evolution of smart health care p. 5
https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Life-Sciences-Health-Care/gx-lshc-hc-outlook-2018.pdf
6 - KPMG, Economic Impact of Medical Research in Australia, released 16 October 2018 p 3-4
https://aamri.org.au/wp-content/uploads/2018/10/Economic-Impact-of-Medical-Research-exec-summary.pdf
7 - Current as at end of June quarter 2018 – The Association of Superannuation Funds of Australia:
https://www.superannuation.asn.au/resources/superannuation-statistics
Contents of this publication are general of nature and are not intended to be used for decision making purposes. Edwards Marshall Financial Solutions Pty Ltd ABN 45 096 434 842 is an Authorised Representative of Edwards Marshall Advisory Pty Ltd ABN 18 600 878 555. AFS Licence No. 479 792.
