Indeed, the spending power of the over 60s globally is set to reach $15trn in the next two years, market researcher Euromonitor believes. This compares to the $18.5trn that the US economy was worth in 2016.
“It is one of the largest economies in the world and it is quite surprising that companies are still struggling at how to address that consumer group because it is so big,” Gaugler says.
“Companies will increasingly turn to these people to generate their growth, which is why it is an increasingly important opportunity for investors,” she adds.
One company focused on this market is Saga. The group, which provides products and services for people aged 50 and above, has a list of 10 million people to sell its holidays and financial services to. These people have not been caught by a filter solely because of their age; they are also considered to be able to afford its services.
Gaugler is a manager of LO Golden Age, a $686.2m global equity fund focusing on companies that earn a significant proportion of their revenue from the ageing population theme.
She and her colleagues have identified a global universe of around 600 companies, which are typically found in the healthcare, financial, consumer discretionary and consumer staples industries.
The fund’s holdings tend to be liquid blue chip stocks, such as Morgan Stanley, Johnson & Johnson and US healthcare company United Health. It is slanted towards North America with US-listed companies accounting for almost 65% of the portfolio at the end of January. UK companies were further down the list at 2.7%.
FROM MILLENNIAL TO CENTENNIAL
Pension funds are taking a ‘the glass is half full approach’ to the ageing population. They are among LO Golden Age’s largest investors, perhaps a sign that they see backing the fund as a natural hedge.
It has taken time for institutions to start looking to build exposure to this market, perhaps they had been looking at another market.
“In terms of taglines the millennial one captured the imagination to a greater extent,” Hudson says. “People did not think it through,” she adds. “At the time they were saying: ‘This is the biggest generation ever’, but it was also a generation without any money. So they might have been better off looking at the older population, who had the money and came through a time when pension benefits were more generous.”
Gaugler says that the public’s view of the older demographic has changed in that retirees are no longer seen as a problem.
“If you opened a newspaper six or seven years ago and if the topic was ageing demographics, then it was to highlight these problems,” she adds. “Today, newspapers and public understanding are much more geared to the opportunity. “We have come from elucidating the associated problems to highlighting the opportunity.”
