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They represent the growing trend among consumer or fashion firms targeting the ageing population, which is large in the developed markets such as the US, Europe, and Japan.
And these are the companies that Meret Gaugler, Portfolio Manager at Lombard Odier Investment Managers is betting clients’ money on.
“If we look at population five years ago, if they talked about ageing they talked about problems with the workforce, problems with health care spend, pension funds, but now a days it’s about opportunities for companies and for investors,” she told Gulf News in an exclusive interview during a visit to Dubai as part of her travels in the Middle East.
“If we look at the market in the US, Europe, and Japan, we like them from the risk management perspective. They are markets with large caps, very liquid companies, low volatility, and good corporate governance,” she added.
Gaugler feels that in an environment where growth is difficult to come by, following and betting on companies that depend on the ageing demographic is probably the only secular growth trend for the next 15-20 years.
“That’s very easy to understand and you have the older generation growing as fast as three times the rate of the younger generation,” she said, adding, “compared to their parents, who were savers, baby boomers and tend to enjoy their lives, and they grow older and spend money on vacations and play golf among other experiences.”
UAE trends
While in Europe, Japan and the US, the number of people over the age of 65 is growing faster than the younger generation and retirees already make up a large percentage of the population (almost 30 per cent in Japan), trends in the UAE are very different for now — with a mostly young population a trend that is expected to continue for the foreseeable future.
However, for the 15 per cent of over 65 year olds in the UAE today, age-related diseases such as diabetes, cardiovascular disease, arthritis, and Alzheimer’s are obviously also a crucial topic — with innovation from multinational companies contributing to the well-being of patients and cost efficiency in the health care system.
Lombadier holds stocks such as from insurance firm AIA and other names in health care, involved in digitising patient records. Others include Novartis and Hesch as well as Norwegian Cruise lines. Sectors such as consumer discretionary, consumer staples, financials to supplement pension tend to benefit from older generations.
Examples from the portfolio with significant revenues exposure to the region are Christian Hansen, Novartis, Sysmex or Thermo Fisher Scientific.
Sustainable growth
“Companies tend to grow faster and have sustainable growth if they target the elderly, than companies that target younger people. The elderly tend to keep spending if things are bad, but they profit more than others if things go up,” Gaugler said.
Currently, the portfolio is just under 30 per cent in health care, but is facing sentiment headwinds as it was a top performer for the past three years. The fund has outperformed the MSCI world US dollar hedge from March 2012 until September by 12.7 per cent. The fund has $700 million (Dh2,569) of assets under management.
Attractive
There are investment opportunities for UAE- and Middle East-based investors through the Lombard Odier Golden Age fund, which has been shown to successfully harness the many opportunities of investing in companies catering to an elderly demographic.
“We think that because we are very liquid and in large cap stocks, the capacity is around $3 billion,” she said.
“From a pure theme standpoint, an environment where growth is a bit of a concern, it is good news for us because we look at superior growers, and we look at growth at a superior price.” she added.
The fund is not exposed to China, and Europe is picking up in terms of growth and still relatively cheap, and the fund is most comfortable in the US, where it holds 60 per cent of its assets.
