Vafa AHMADI,  
Head of Global Thematic Equities at Amundi

« Ageing population is a non-cyclical and permanent investment theme, leading to value creation. »

« Ageing population is a non-cyclical and permanent investment theme, leading to value creation. »

« Ageing population is a non-cyclical and permanent investment theme, leading to value creation. »

Vafa Ahmadi first enumerated some key statistics. The ageing of the population is a trend that is affecting global demographics over the long term. The increase in life expectancy at birth of over 12 years between 1990 and 2050, the fall in the fertility rate from three children per woman in 1990 to two by 2050, and the fall in the infant mortality rate by a factor of four in the last 60 years, are its main factors.

There are now 962 million people over 60 worldwide, versus 382 million in 1980. This should rise to 2.1 billion by 2050. The population aged over 80 should more than triple, from 137 million in 2017 to 425 million by 2050. Although the trend is more advanced in Europe and North America, wheremore than one in five is already over 60, other regions are catching up. By 2050, the ratio of one senior citizen for every five people will be the norm worldwide, whereas it is currently only one for every eight.

This demographic trend has an important impact on economies, creating both problems and opportunities, said Mr. Ahmadi. In developed countries, senior citizens have the most purchasing power and are active consumers, with their expenditures increasing faster than those of other groups. By 2020 their combined purchasing power worldwide should be $15 trillion. Consumption patterns vary according to sector and age group. Young pensioners who are still active wish to retain their assets while enjoying their well-being and leisure. The more elderly have needs concentrated in care services. Both groups consume more pharmaceuticals and healthcare services than other age brackets.

Mr. Ahmadi then turned to the benefits of ageing related thematic investment. The ageing population is one of the most significant demographic transformations of the 21 st century, leading to major revenue increases for sectors favored by senior citizens. The “Silver Economy” is a complete and autonomous ecosystem not limited to the pharmaceuticals and healthcare equipment sectors. It is also a non-cyclical, permanent theme poised to durably affect global demography.

THEMATIC VS. “TRADITIONAL” INVESTMENT Investing in long-term themes does not fit in with a traditional investment approach. In “traditional” investment, benchmarks are given top billing, and investing is fairly easy: liquidity, regions, and sectors are well defined. Admittedly, the benchmarks are less than optimal, because they give past winners a leading role. Thematic investing is quite different:
• It does not involve any ex ante view in terms of benchmarks;
• The idea is to focus on future winners: no more benchmark constraint (specifically in terms of market cap), no more predefined regional or sectoral constraint. Note, however, that sectoral and regional diversification is still possible;
• Thematic investing offers a certain decorrelation with traditional betas, and with investment factors, which is an important asset;
• These are real long-term investments, in a world dominated by the short term (the average holding period for a stock has gone from 48 months in the 1950s, to eight months in 2000, and…22 seconds in the early 2010s);
When we speak of future themes, we think of innovative processes, which we’ll find in the large companies but also in small businesses. There comes the trade-off between Large caps vs SMID caps.