Perspective

Managers' views

How the ageing population could be a boon for investors


John Bowler

John Bowler

Fund Manager, Global Healthcare

See all articles

Higher living standards and healthier lifestyles are driving an increase in life expectancy in many countries. In the developed world, people aged over 65 now make up the fastest growing segment of society. An older population comes a higher risk of chronic diseases, leading to increased demand for healthcare services.

With healthcare budgets in many developed countries already stretched, new technologies that make healthcare provision more efficient could offer significant growth opportunities for investors.

Demographics driving high demand for healthcare

In 1950, the global average lifespan was just 47 years. By 2020, that will have risen to 73 years and by 2030 it is estimated by the United Nations that people around the world can expect to live (on average) to the age of 83. The fastest growing age group in the world is now those aged over 65, who will account for 14.1% of the global population by 2040, compared with 9.3% in 2020.

20200306_cn_eng_chart_1.jpg

With increasing age comes increasing healthcare complications. Conditions such as arthritis, heart disease, cancer, diabetes and chronic obstructive pulmonary disease (COPD) become more common as people grow older. Diabetes, for example, is expected to account for 25.5 million deaths around the world in 2020, according to research by the Marshall Protocol Knowledge Base. This compares to around 14.5 million deaths in 1990.

Cost pressure driving the call for change

Developed countries spend on average between 10% and 12% of GDP on healthcare. This is set to rise to 25%. With an ageing population, there is increasing pressure on healthcare budgets. Government spending is stretched in many countries as areas such as education, welfare and pensions compete for funding, thus creating a significant need for healthcare providers to bolster efficiency.

Technology is providing the means to bolster efficiency

The way that technology is transforming the provision of healthcare can be seen in the treatment of diabetes. The number of people living with this chronic disease around the world is set to reach 642 million by 2040. This compares to 415 million in 2015. Wearable glucose monitors, which continuously measure a patient’s sugar levels throughout the day and night, help to reduce the need for finger-prick blood tests. The device makes it easier for sufferers to self-manage their condition, cutting demand on hospitals and surgeries.

More effective use of technology is helping to reduce waste, cut down on mistakes and bolster healthcare efficiencies. Smartphone technology is being used to monitor the health of patients, with some apps offering rewards when a patient achieves a certain activity or health goal, for example walking a certain number of steps in a day. Appointments with doctors and therapists are also increasingly being made available via video apps on phone and laptops.

Innovation is opening up new investment opportunities

With the development of new healthcare technologies rapidly accelerating, companies at the forefront of innovation could offer attractive opportunities for long-term investors. The value of pharmaceutical and biotech investments grew by 232% between 2010 and 2018 to $28.3 billion (from $8.5 billion), according to research by McKinsey. In the same period, the value of health tech and digital health investments grew by 186% to $30.8 billion (from $10.8 billion).

20200306_cn_eng_chart_2.jpg

Moreover, research by BofA Merrill Lynch has predicted that some areas of healthcare could see their market sizes expand by compound annual growth rates (CAGR) of more than 50% in the period between 2018 and 2025. For example, the market size for big data (the better use of data to improve patient outcomes) and artificial intelligence in healthcare is forecast to grow by a CAGR of 50.1% to $36.1 billion (from $2.1 billion).

 

Important Information
Any security(s) mentioned above is for illustrative purpose only, not a recommendation to invest or divest.
This document is intended to be for information purposes only and it is not intended as promotional material in any respect. The views and opinions contained herein are those of the author(s), and do not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. The material is not intended to provide, and should not be relied on for investment advice or recommendation. Opinions stated are matters of judgment, which may change. Information herein is believed to be reliable, but Schroder Investment Management (Hong Kong) Limited does not warrant its completeness or accuracy.
Investment involves risks. Past performance and any forecasts are not necessarily a guide to future or likely performance. You should remember that the value of investments can go down as well as up and is not guaranteed. Exchange rate changes may cause the value of the overseas investments to rise or fall. For risks associated with investment in securities in emerging and less developed markets, please refer to the relevant offering document.
The information contained in this document is provided for information purpose only and does not constitute any solicitation and offering of investment products. Potential investors should be aware that such investments involve market risk and should be regarded as long-term investments.
Derivatives carry a high degree of risk and should only be considered by sophisticated investors.
This material, including the website, has not been reviewed by the SFC. Issued by Schroder Investment Management (Hong Kong) Limited.