PGIM identifies two investment themes around aging: real estate and health care. Real estate represents 40 percent of gross assets for older households. As boomers seek to live active senior lifestyles, demand for residential properties in urban areas is growing. As they enter their 70s and 80s, growing demand for independent and assisted living units will accelerate.
Health-care costs also increase with age: “People over the age of 85 spend twice as much as those aged 65 to 84—who, in turn, spend double the amount of 45- to 64-year-olds.” PGIM believes pharma, biotech and “silvertech” innovations that personalize and improve care for seniors will benefit.
As with any trend, the aging population will produce winners and losers. Patience and pragmatic understanding of demographic and health care trends is required, but long-term investors will be rewarded for identifying structural market drivers for key industries and businesses to maintain and create wealth.
Shankh Mitra, a former portfolio manager of a major hedge fund, is senior vice president of finance and investments at Welltower Inc.