Julius Baer_oct 2023
In the middle of a swiftly aging global population, a profound transformation is under way, and it is creating remarkable opportunities for savvy investors – welcome to the era of the Silver Economy Image Credit: Shutterstock

The earth is now home to more than 8 billion inhabitants, with the global population expected to reach 9.7 billion by 2050. Remarkable advancements in the field of medical science have ushered in a new era of healthcare excellence and more effective disease prevention. The quality of medical care has significantly improved and life expectancy has seen a remarkable increase.

In the middle of a swiftly aging global population, a profound transformation is under way, and it is creating remarkable opportunities for savvy investors – welcome to the era of the Silver Economy. “As of 2022, 10 per cent of the global population was aged 65 or older. By 2050, that number should soar to 16 per cent,” says Dr. Damien Ng, Next Generation Research Analyst at Swiss wealth manager Julius Baer. The opportunities encompass diverse categories, including healthcare, elderly care, financial planning, beauty, and wellness, each offering distinctive prospects in addressing the evolving needs posed by an aging population.

Healthcare opportunities

According to Dr. Ng, the unstoppable rise of an aging population means the healthcare sector should offer attractive investment opportunities over the long term. With age comes an increased likelihood of health issues, particularly concerning maladies like cancer, obesity, and Alzheimer's disease, plus age-related conditions relating to the eyes, ears, and mobility. Therefore, particular segments within the healthcare industry should gain even greater relevance as they cater to the expanding medical requirements of older adults, says the research analyst. For instance, the aging of our population and higher life expectancy means that the number of persons with cataracts is on the rise. These structural forces present strong investment opportunities over the longer term.

For those with the foresight to embrace the Silver Economy's potential, it represents more than just a chance for financial gain. It's an opportunity to be at the forefront of a societal shift towards a more inclusive, compassionate, and age-friendly world.

- Dr. Damien Ng, Next Generation Research Analyst, Julius Baer

Beyond the healthcare aspects of extended longevity, the USD 420 billion beauty industry remains resilient despite a challenging macroeconomic environment. As seniors aspire to maintain an active and youthful lifestyle while aging gracefully, companies specialising in anti-aging products and services are claiming a substantial slice of the Silver Economy pie. The pursuit of youthful appearances transcends age, making investments in this sector not only profitable, but also enduring. Whether it’s skincare, cosmetics, or non-invasive cosmetic procedures, the beauty industry remains attractive for investors.

Travel and leisure 

Travel and leisure pursuits, alongside beauty and anti-aging products, should also experience substantial growth.

“The burgeoning desire among older adults to lead active and fulfilling lives should fuel the USD 1 trillion global travel and leisure industries, especially in the aftermath of the Covid-19 pandemic.” says Dr. Ng. The international cruise industry is a focal point here, as there are several senior-focused cruise offerings that provide not only luxury, but also tailored health and wellness programmes. A recent survey reveals that as many as 85 per cent of adults over 50 in the United States prioritise travel and vacation as their top discretionary spending.

Nutrition products and supplements targeting the elderly population are also expected to flourish. As nutrition plays a pivotal role in healthy aging, companies specialising in nutritional supplements, fortified foods, and dietary plans tailored to older adults’ needs are poised for growth. Health conditions like Sarcopenia, which essentially refers to the loss of skeletal muscle mass, are more prevalent among older individuals, especially those above 70 years of age. The reason is that their bodies are increasingly unable to digest and absorb the nutrients from food, and this is aggravated by the intake of some medications that may inhibit the digestive process more. “For this reason, some studies have uncovered a higher risk of frailty among older individuals as a result of a lower intake of vitamins like B12, C, D, and calcium”, says the research analyst. As awareness of health and nutrition grows among the aging population, it should unlock substantial investment opportunities in this sector.

Pension and financial planning 

Financial planning also plays a pivotal role in the Silver Economy. A longer life necessitates comprehensive financial planning. As individuals prepare for extended retirement, the demand for sophisticated financial services is skyrocketing. Investments in companies offering retirement planning solutions, pension management, and wealth preservation strategies can be strategic moves. Additionally, the shift towards digital financial tools opens new avenues for tech-savvy investors. However, Dr. Ng points out that although the transition from face-to-face to digital tools in retirement planning services is inevitable, investors should consider the varying needs of different income groups and regions. Customising financial solutions for diverse aging needs is vital.

Real estate and retirement homes represent another facet of the Silver Economy. Investments in nursing homes, assisted living facilities, and home care agencies offer financial potential and the chance to contribute to a more compassionate and supportive society. “During periods of economic growth, real estate investment trusts (REITs) tend to increase alongside interest rates since an expanding economy enhances the value of REITs thanks to the higher value of their underlying real estate assets. Nevertheless, in a cooling economy – which is our baseline economic scenario through early 2024 – the relationship turns negative,” says Dr. Ng.

He also emphasises that cultural and societal differences dictate the appeal of retirement homes in various regions. While Western societies favour nursing homes for elderly care, Asian cultures often prefer intergenerational living. This diversity in preferences, in turn, opens doors for different types of investments in real estate for retirement homes and community-based healthcare facilities based on the region.

Choosing the right regions for Silver Economy investments is pivotal. North America, Europe, and the Asia Pacific are key, as they are set for significant demographic shifts with over a third of the population aged 65+ by 2050. China’s aging populace is a substantial opportunity, despite economic challenges. India’s impending demographic shift offers prospects in healthcare and retirement planning.

The long game

The research analyst also stresses that investing in longevity-linked assets remains attractive over the longer term due to the defensive nature of the theme from the diversification perspective. Investing in the Silver Economy requires a holistic perspective that encompasses not only financial gains but also a commitment to improving the quality of life for older adults. “The Silver Economy isn't solely a financial trend – it is a transformative force that touches every facet of our society. For those with the foresight to embrace the Silver Economy's potential, it represents more than just a chance for financial gain. It's an opportunity to be at the forefront of a societal shift towards a more inclusive, compassionate, and age-friendly world,” he concludes.

Silver Economy vs. Youthful Markets: A Contrarian View

In regions like the UAE and the GCC, where youth predominates, the relevance of the silver economy might not be immediately apparent. However, adopting a contrarian perspective is crucial.

1. Preparing for the future: While these regions currently enjoy youthful demographics, it’s crucial to plan for the long term. Populations naturally age over time, necessitating investment in infrastructure, healthcare, and elderly services.

2. Crisis preparedness: Even in youthful populations, unforeseen crises can occur. Adequate hospital capacity and healthcare infrastructure are vital.

3. Balanced approach: Investors can balance capitalising on Silver Economy opportunities with investments in youth-driven sectors. A diversified portfolio is important.

4. Foresight and adaptability: While the Silver Economy may not be an immediate concern in youthful markets, planning for demographic shifts can make all the difference in the future.

4 ways to navigate the Silver Economy

The emergence of the Silver Economy has far-reaching implications, not only for individual investors but also for traditional pension funds. Expatriates and those with pension pots in other countries may find themselves re-evaluating their financial strategies.

1. Diversify Your Portfolio:

Relying solely on a pension or potential social security might not be enough to secure a comfortable retirement. The silver economy introduces new dynamics, such as increased healthcare needs and changing consumer patterns. To adapt, consider diversifying the investment portfolio.

2. Balanced Approach:

The Silver Economy encompasses various sectors, from healthcare and nutrition to leisure and financial planning. A balanced approach to investment can help mitigate risks and capitalise on opportunities in this evolving landscape.

3. Country-Specific Considerations:

Different countries have varying pension systems and policies. Research your specific situation to determine how the Silver Economy fits into your retirement plans. Some countries offer state-funded pensions, while others rely more on private contributions.

4. Private Alternatives:

In some regions, private pension accounts and insurance options can supplement government-funded pensions. Exploring these avenues may provide more financial flexibility and security in your retirement years.

This content comes from Reach by Gulf News, which is the branded content team of GN Media.