PARIS/LONDON: Their birth heralded the longest phase of economic growth in living memory. Now, 65 years on, wealthy “Baby Boomers” are doing the feeble global economy another good turn, according to some fund managers.
Millions of newly-retired Europeans, North Americans and Japanese are breaking open bulging pension pots, spelling big profits for investors who can spot the companies best placed to cater to their spending habits.
A small but fast-growing class of mutual funds is buying shares in firms with most to gain from ageing populations, from drugmaker Roche and Norwegian Cruise Line to funeral operator Service Corporation International.
While the subject may not be racy, the returns can be, with two of Europe’s biggest such funds, Lombard Odier’s Golden Age fund and CPR Asset Management’s Silver Age fund, achieving respective returns about double and four times the equivalent 13 percent of the Eurostoxx index since their 2009 launch.
“The over-65s tend to have much higher disposable income and part of the reason for that is because they had money invested in the stock market during the 1980s and 1990s when shares were doing exceptionally well,” said Johan Utterman, portfolio manager of the Lombard Odier Golden Age Fund.
Golden Age returned 34 percent from its inception in November 2009 through the end of May while Silver Age had gained nearly 50 percent since it kicked off activities a month later. Both have, however, lost ground in the equity markets rout in recent weeks — roughly five percent and six percent respectively.
Similar funds in Europe include Schroder International Selection Fund Global Demographic Opportunities and, in Asia, the somewhat more broadly themed Chang Xin Jinli Equity Fund, which has some $900m under management.
CPR, while investing only in European equities, says the old age theme is broad enough to allow a diverse portfolio. The fund has considered buying some Japanese stocks — given that Japan is the country whose population has the highest proportion of old people — though it has shied away from doing so thus far.
“Other funds have attempted this, but they typically had too narrow a way of looking at ageing,” said Vafa Ahmadi, head of thematic and sector allocation funds at CPR Asset Management. “They didn’t consider ageing except through health care in the larger sense, whether drugs or retirement homes.”
Widening the net to the early retirement years allowed the fund to make leisure and savings stocks key portfolio themes along with pharmaceuticals, healthcare equipment and wellbeing - which includes cosmetics companies such as France’s L’Oreal and Germany’s Beiersdorf.
Beiersdorf, the maker of Nivea face and body lotions, “understood as well as L’Oreal and perhaps better that they needed to provide something that was less top of the range in terms of price and which was focused on men,” Ahmadi said.
“This is what we like, when (the ageing trend) impacts the business model - you find real deposits of growth,” he said.
Reuters
