BLOG: Five ways to invest in a growing population
At the start of the 20th century there were 1.65 billion people on the planet. A hundred years later, at the start of the new millennium, this figure had grown to six billion. Last month, the world’s population hit eight billion.
That’s a lot of people on one relatively small planet. And, although the pace of growth is slowing, it is still expected to reach a peak of 10.4 billion by 2080.
Of course, more people mean more challenges. Our natural resources are already stretched, infrastructure is buckling under the demand and, while the population is growing, it is also aging as birth rates are falling and improvements in healthcare mean we are all living longer.
But with challenges also comes opportunities. And for investors there are plenty of ways to invest in this long-term trend. Here, I look at five different ways we can invest in the world’s growing population and suggest some funds that could fit the bill.
First up is an obvious beneficiary: healthcare. As populations grow, so too does the burden on healthcare services, especially as the population ages.
According to the OECD, health spending as a share of GDP jumped to 9.7% across OECD countries in 2020, up from 8.8% in 2019. Preliminary estimates suggest that it increased by a further 6% on average in 2021.
So, any company that can help deliver the holy grail of better healthcare services for less money will likely be popular with both governments and the general public.
2) Financial services
Financial services is another area that could benefit from a growing population – not just insurance but investment services too as we will all need to take care of our own financial futures and make our retirement savings last longer.
Funding of long-term care will also be critical, and insurers will need to play a role in a more sustainable solution, while banking services in emerging markets should also see exponential growth.
As populations grow, infrastructure needs to grow with them, especially as increased urbanisation comes hand in hand with this trend.
This infrastructure can be anything from hospitals and schools to roads and communications towers. In order to keep up with the population growth it is estimated that some $47trn will need to be invested in new infrastructure by 2050.
4) The middle classes
More people also means we’ll consume more, especially as the middle-class population also continues to grow.
More than 525 million people in Asia can already be termed middle class – that’s more than the entire population of the European Union.
Over the next two decades the world’s middle classes are expected to grow by another three billion people, with the majority coming from emerging markets. The investment opportunities this trend provides are enormous.
When it comes to the planet that houses all these people, overconsumption can be a big problem, however, and perhaps even more so than overpopulation.
Because a small number of people are causing far more than their fair share of emissions. Kenya, for example, has 55 million people – about 95 times more than the population of Wyoming in the United States.
But Wyoming emits 3.7 times the amount of carbon dioxide as Kenya! As the world comes together to fight climate change, this is another area for investors to consider.
Five investment funds that fit the bill
1) Polar Capital Global Healthcare Trust
Polar Capital Global Healthcare Trust invests in healthcare stocks from around the globe. These companies will predominantly come from four sub-sectors: pharmaceuticals, biotechnology, medical technology and healthcare services.
2) Jupiter Financial Opportunities
This fund is a concentrated portfolio of ideas from financial services and associated firms from across the globe.
This will include areas such as stock exchanges and online payment companies. The manager looks at the wider trends driving the economy, and the impact these have on the financial services sector.
3) First Sentier Global Listed Infrastructure
First Sentier Investors was one of the pioneers in providing access to this asset class, which quickly captured the attention of income-focused investors. The fund aims to provide investors with a mix of strong capital growth and inflation-protected income by investing in a globally diversified portfolio of infrastructure securities.
4) Aubrey Global Emerging Markets Opportunities
This fund invests in companies offering products and services to the upwardly mobile, ambitious and aspirational population centres which account for over 70% of the world’s growth. Preferred areas include the travel, education, healthcare and e-commerce sectors, and there is a focus on firms which either have dominant or first-mover advantage.
5) Rathbone Greenbank Global Sustainability
This fund has the UN’s sustainable development goals at the heart of its process. These 17 goals recognise that ending poverty and other deprivations must go hand-in-hand with strategies that improve health and education, reduce inequality, and spur economic growth – all while tackling climate change and working to preserve our oceans and forests.
Juliet Schooling Latter is research director at FundCalibre