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#Market Strategy — 05.03.2019

Health and Well-Being: Focusing On The Business Of Longevity

THEME 8

One of the major demographic trends is life extension. By 2050, life expectancy worldwide is set to increase by seven years.

One consequence is that people will have more free time and will seek to lead a healthier lifestyle, especially as seniors have never been in such a strong financial position.

This phenomenon is creating good investment opportunities in the Health, Nutrition and Leisure sectors.

Investment Theme 8 | BNP PARIBAS WEALTH MANAGEMENT

OUR RECOMMENDATIONS

This investment theme is based on a strong, secular and global trend with very good visibility. The best way to benefit is through the equity markets.

Companies covered by this theme operate in the Health sector but also in Consumer Discretionary and Technology. Such companies may have large or small market capitalisations, especially those specialised in medical technology. In this field, the risk may be very high, hence the importance of high diversification.

The ideal investment period is multi-annual given the structural nature of life extension and the desire to lead a healthier lifestyle. If exposure to this theme is taken via highly-diversified investments, then it should be considered as a core holding.

 


One of the three major demographic trends

One of the three major demographic trends is life extension (the other two being world population growth and the rise of the middle classes in Emerging Market countries). By 2050, life expectancy worldwide is set to increase by seven years, with the over 60s projected to more than double in number, while almost 1 in 4 people will be over 60 (source: United Nations). One consequence is that people will have more free time and will seek to lead a healthier lifestyle, especially as seniors have never been in such a strong financial position. This is creating good investment opportunities in the Health, Nutrition and Leisure sectors.

A good prognosis for the Health sector

The Health sector is expanding at 5% per annum. The longevity business has a higher potential. A longer life expectancy has a downside to it: chronic and degenerative diseases are on the rise. In order to rein in costs, innovation is playing a key role. Beyond the development of new drugs and increasingly personalised treatments, demand for medical technology is on the up. Artificial Intelligence, "Big Data" and the Internet of Things should help people to make better decisions in the field. New and very promising opportunities are emerging thanks to remote medicine and mobile devices, used for informing, alerting, registering purposes, and so on. A still nascent activity is gene therapy, which enjoys huge potential for treating and preventing disease. The approach is based on the use of genes rather than medication or surgical operations.

Healthy living implies a healthy diet  

In recent years, there has been an explosion of consumer interest in nutrition, mainly stemming from the problem of obesity. This interest in food is accelerating with the boom in longevity and the desire for healthy living among seniors.

Companies focusing on organic food markets, fresh goods, products with higher nutritional value and the improved productivity of agricultural practices are the first to cash in on this phenomenon.

More committed to leisure!  

Never before have seniors enjoyed such financial health! Adding to their physical health, money helps them to keep up many activities. According to McKinsey & Company, a consultancy, seniors living in urban areas in developed countries will contribute to half of the consumption growth between 2015 and 2030. Top spending priorities are personal care, the home, leisure (especially travel) and exercise. According to McKinsey, the time dedicated to leisure and exercise in the US among people aged 65 years or over should grow by 195 million hours, a massive chunk of the projected total increase of 210 million hours. This is good news for employment, accounting for the equivalent of 24 million full-time jobs.

A choice investment  

Life extension is an investment in a strong trend, which boasts good visibility. This makes an ideal core holding.

MAIN RISKS

The main risk is stock-picking, particularly for investments in medical technology companies. This is an absolute risk. Technological risks may result in very steep price declines.

A relative risk exists. If investors were to be enthused by pro-cyclical investments, the interest in themes considered as core holdings and for the long term would be eroded, and an underperformance would ensue.