How to Profit from an Ageing Population

The number of baby boomers is growing at three times the rate of younger generations and in many countries they sit on up to three quarters of net financial wealth

Emma Wall 15 September, 2015 | 9:47AM
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Emma Wall: Hello and welcome to the Morningstar Series "Why Should I Invest with You?" I'm Emma Wall and I'm joined today by Johan Utterman, Manager of the Lombard Odier Golden Age Fund.

Hi, Johan.

Johan Utterman: Hi, Emma. Thank you for having me.

Wall: Its quite a unique offering, your fund. The Golden Age fund, perhaps you can explain to would be investors what the themes behind it or the reasoning behind the fund is?

Utterman: Yes, baby boomers and seniors are growing at three times the rate of younger generations and in many countries they sit on up to three quarters of net financial wealth. So we think that companies that can market products and services effectively to them have an opportunity to grow faster than the broader market.

Wall: And of course we all know that we are all living longer and we are staying healthier for longer because we all have to retire later. Unfortunately retirement age is moving ever upwards. And in Japan they actually have quite a problem because they have an ageing population that perhaps the negatives aside. How can we as investors benefit from this trend?

Utterman: So, we in terms of investment opportunities. We see them in health care, it might be companies like Allergan (AGN) that makes Botox or pharmaceuticals for eye care diseases related to ageing or diabetes Novo Nordisk, Roche (ROG) in cancer, more on the consumer discretionary side. So that’s more compensating for ageing or curing diseases. Then on the consumer discretionary side how to enjoy retirement going on a cruise, buying a membership in golf resort and then being able to afford it. So investing on top of your government subsidized pension, so life insurance, wealth management.

Wall: Health care you mentioned makes up 45% of the portfolio. Is this an active decision you've made to expose yourself to that sector or is it really very much about sort of bottom-up where the greatest opportunities are with stocks?

Utterman: It's a bottom-up decision, it's opportunistic where do we find the best investment opportunities with a top down overlay, just to make sure we don’t inadvertently end up with some exposures that we don’t geographically or by sector. But health care lands itself very well there are lot of companies whose earnings growth is economically resilient and its sustainable for many years to come, because of the ageing population.

Wall: And looking then at that geographical breakdown. As you mentioned there, you have got a sizable proportion of the fund in the U.S. I suppose it is two-fold where else are you seeing opportunities and are you worried by the fact that lot of people think that U.S. stocks are looking overvalued.

Utterman: No, in the U.S. the stock market is actually least dependent upon GDP growth, because there is so much innovation in health care and in technology. So because of that innovation and R&D we have chosen to have meaningful exposure to it. Then elsewhere in the world we find lot of opportunities in Japan and Western Europe.

Wall: So where about in Japan and in wider Europe are you seeing these opportunities?

Utterman: Lots of opportunities in health care that we talked about also in consumer discretionary. So enjoying retirement be it a membership in golf resort, going on a cruise, riding a Harley-Davidson (HOG) or looking good, Botox for example. That’s actually number one investment in our fund Allergan.

Wall: Johan, thank you very much.

Utterman: Thank you.

Wall: This is Emma Wall from Morningstar. Thank you for watching.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Harley-Davidson Inc32.52 USD-1.90Rating
LO Funds Golden Age USD MA34.52 USD-0.50Rating
Roche Holding AG247.60 CHF0.73Rating

About Author

Emma Wall  is former Senior International Editor for Morningstar

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