Healthcare: Profit from an Ageing Population

Pharmaceuticals, artificial intelligence and robotics - Coutts' Mohammed Syed explains how investors can profit from demographic shifts

Emma Wall 17 September, 2018 | 12:14AM
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Emma Wall: Hello and welcome to the Morningstar Series "Market Reaction". I'm Emma Wall and I'm joined today by Mohammed Syed, Head of Investments for Coutts to talk about demographics and health care.

Hello Mohammed.

Mohammed Syed: Hello Emma. How are you?

Wall: I'm very well, thank you. How are you?

Syed: Good, thank you.

Wall: So, we are here today to talk about demographics. Now we hear quite a lot of negativity surrounding particularly demographics in the western world, ageing population, burden on the economy. Places like Japan where they have a very much ageing population. But you are here to say that actually there is an investment case, investment opportunity in that changing demographics, isn’t there.

Syed: Yes, its correct. I think if you look at the trends over the last few years that has been the case for I would say probably 20, 30 years. Where developed countries have had ageing populations for quite some time and as you quite rightly pointed out Japan and South Korea are the ones that lead that. But with that comes significant opportunity for both investors, but also for how governments treat the populations, but also how to bring up the younger populations. And that leads itself into – in the area that we are particularly focused on which is healthcare. So, healthcare has ramifications globally both for ageing populations as well as the younger populations and some of the changes that are taking place. And it’s a very exciting time, and it's also frankly a very exciting time to be what I call alive.

Wall: And what is it about these pharmaceutical companies that makes them exciting investment opportunities, because traditionally pharmaceuticals have been quite a contrarian investment. So reliant on a particular drug that when that drug is no longer the property of that individual pharmaceutical company there are concerns about valuation etc. But this is quite a specific tailwind, isn’t it?

Syed: It is, but I think if you broaden what healthcare really means, is beyond just the pharma companies. So, you've got significant trends in what is now termed med technology. You've got significant improvements in competition power. So, with the quantum computing coming on board, you'll have very targeted simulations done around drugs, around what is effective. You also have significant inroads into cancer research, into complex neuro science diseases.

There is an institute that the UK Government set up very recently called the Francis Crick. It’s making groundbreaking research which is impacting really global populations on anything that’s really complex. So, healthcare of which pharma is just one vertical, is really broad, but also very exciting, but also very challenging. So as fast as I think medical science is improving itself people are also finding in the scientific world what their assumptions were historically around what spreads cancer or what causes cancer or how you treat cancer are significantly getting disrupted. And that is competition power, I think research, I think also how research is conducted and who brings to bear some of the findings because it's no longer just a developed country issue, it’s developing countries and it’s the globe.

I'll give you an example of Dengue and Zika virus. So, the perception historically was that Dengue fever was really, it is tropical, but it was in largely poor countries. But actually, it cuts across Florida, it cuts across Singapore, it cuts across Africa clearly and also Latin America. And the efficacy of how you eradicate Dengue was a UK company. Came out of the University of Oxford, a spin-off, and is now a global institution listed on the stock market. And so those are some of the things that are impacting healthcare as a sector.

Wall: What about robotics, and you said medical tech at the beginning of that answer. I think that’s quite an exciting space, but one that – the idea and the reality are slightly mismatched at the moment. We love the idea of having these robots to sort of take care of elderly people. How far away are we from that?

Syed: Well, it varies. In robotic surgery I would say it's relatively advanced. But it is improving all the time. In robotic care I think that’s really early on and it’s very early phases. But surgery using robots or robotic arms. Certainly, in the UK it has been around for a good decade and it continues to improve. The same is true in Japan and the same is true in Germany and in the US. So, I think it'll depend on which end of robotics we look at. The other is the use of what's called machine learning. Machine learning is applied very effectively in simulating environments that allow certain bacteria to form, and so you can then simulate it at a much faster pace and a lot quicker diseases in the lab, in the safe environment, and then figure out ways to eradicate them.

Wall: And you mentioned one company already that was leader for eradicating or helping to control Dengue fever and Zika. Are there any other particular companies that you think are really nailing this trend?

Syed: There are lots of companies frankly all over the world. And so, part of our job is to not so much identify the individual companies but look at funds that are looking at these companies. So, we've invested with two funds, one is Polar Capital Healthcare Fund that looks at some of these medtech companies, including pharma companies, including research and invest with those. So that’s what they are doing. But we also have a barbell approach at Coutts for some of our clients which is, that’s the listed route public markets and then we have an unlisted private route.

And so the company I referenced earlier on the Zika virus was for our clients that have the sophistication and have the professional wherewithal to invest into private companies. And so we have a team that looks at that, called investment opportunity service, and that looks at biotech and medtech companies. But that includes also technology apparatus. So, whether it's robotic arms et cetera. So, there is quite a wide spectrum on where we play and how we access that particular sector.

Wall: Mohammed, thank you very much.

Syed: Thank you.

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


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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Polar Capital Healthcare Opports I Inc72.55 USD-0.77Rating

About Author

Emma Wall  is former Senior International Editor for Morningstar

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