Institutions’ $200bn punt on the elderly

7 Dec 2018

Ageing populations are putting pressure on pension schemes, but they are also creating opportunities.

People living longer means that more benefits will have to be paid, but there is a shortage of specialised accommodation and medical facilities to support the rising elderly population.

The number of living people having celebrated their 60th birthday around the world is set to rise to 2.1 billion in 2050 from 962 million in 2017, according to the World Population Prospects. This has created demand for retirement communities, care homes and surgeries.

Governments cannot take the financial strain of this alone, so pension schemes are stepping in.

Indeed, institutional investors are planning to invest $200bn into healthcare infrastructure in the next five years, according to an Octopus Group survey of institutions with $6.8trn under management.

The respondents which already have healthcare-related property in their portfolios intend to increase their holdings in this sector by 2023 to 9.5%, up from 6.1% currently.

It is not just a growing market that is pulling institutional investors towards the sector. Almost half of the respondents (46%) cite risk-adjusted returns as a driver. More than half (52%) say the sector is performing as expected, while almost a fifth (19%) reported that performance has exceeded expectations.

Almost 40% of those invested in the sector have collected annualised returns of between 10% and 15% over the past five years.

Alternatives help diversify portfolios due to their low correlation to mainstream markets. So with the equity bull run ending, political risk rising across the world and pension schemes needing sustainable long-term returns healthcare property is an asset that is being seen as a potential shelter from macroeconomic factors.

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