An ageing population is an important investment theme often discussed by fund managers.
I remember listening to one fund manager over a decade ago who had added shares in a garden centre chain to his portfolio, on the basis that older people like shopping at garden centres.
Whilst garden centres might or might not be the perfect business to profit from an ageing population, there are other sectors which make strong cases.
JP Morgan Asset Management has published a briefing note talking about the significant investment opportunity in the healthcare sector, as a result of an ageing population.
They believe that emerging market economies in particular will deliver a 70% growth in demand for pharmaceuticals over the next five years.
Healthcare already accounts for around 10% of GDP in developed economies. Populations are ageing particularly fast in Europe and North America, where 30% and 25% of the population respectively will be over age 60 by 2025.
By 2050, the number of people globally who are aged 60 or over is expected to triple to two billion.
JP Morgan points out that pharmaceutical stocks typically offer good dividends, strong balance sheets and relatively stable businesses; all attractive features when global stock markets are volatile.
There are also specific risks to consider in the pharmaceutical sector.
As patents expire, cheaper generic drugs can enter the market and damage revenues. In the US, healthcare reform remains uncertain and most governments around the world face budget pressures that could see spending on healthcare reduced.
Of course healthcare is not only about drugs.
Other investment opportunities exist in the biotech sector and within business sectors including private nursing care.
Investors will typically gain exposure to this important investment theme via their existing equity holdings, particularly if actively managed funds are used and the fund managers pursue a healthcare theme based on an ageing population.
Care should be taken if adding healthcare specific funds or stocks to a portfolio, unless the risk of duplication is properly assessed.
Photo credit: Flickr/delphwynd
