Health care has come under the spotlight during the coronavirus pandemic, as the sector is seen as a key part of the solution to the global health emergency. It is also a key part of the longevity investment theme, because on average, as we age, we consume more health care goods and services.
Among the health care companies that have benefited from their part in dealing with the coronavirus pandemic are telehealth providers. This increased use of digital technology to provide health care services is reflecting a longer-term trend of how health care systems need to change, to deal with the fact that we have a large aging population globally. Even before the COVID-19 crisis, there were questions around how we manage that demand and build a more sustainable health care system for the long term.
Other parts of the longevity economy have not fared so well. Silver spending is an important aspect of the longevity economy and includes activities such as travel and leisure. The dramatic reduction in global travel as a consequence of the COVID-19 pandemic has been perhaps most visible in the cruise line industry, with the last major vessel now returned to port.
The key question is whether travelers believe going on a cruise is a safe activity after recent events. Previous crises faced by the cruise industry suggest demand will bounce back, but when and to what extent is unclear.
Financial planning is another important activity for the silver spender. If you want to unlock the benefits of a long life, you need to be thinking about how your money is going to last you, perhaps over a longer period than you had earlier anticipated.
Private banks’ and wealth managers’ share prices declined during the stock market volatility in the first quarter of 2020. But taking a long-term view, it seems certain that financial planning will remain an essential activity to unlocking the full benefits of a longer life.
One underappreciated aspect of the crisis is the potential for increased demand for health and protection insurance from consumers in countries with underdeveloped health care systems—particularly those experiencing significant COVID-19 outbreaks. We have seen weak share price performance from multiple insurers operating in this space, but over the long term this crisis may stimulate greater demand for their products.
At the same time, it is important to consider longevity being about the whole of life rather than just the end of life. For example, you can’t reach your 80s and decide to start to run marathons and live to be 100 as a result—you probably need to be doing these things over your whole life.
Education also comes into the "whole of life" approach to longevity. While many parents are currently home schooling their children, and perhaps appreciating in a new way the challenges of education, we have been considering this for some time. People who might live to 100 are not necessarily going to find that things they learned at school are all still applicable 40 years further down the line. This creates opportunities for companies in the whole of life and ongoing education and training sector.
Despite the outbreak, global populations continue to age, and we expect global life expectancies to creep higher over the long term. Although we may see some changes in consumption patterns post-COVID-19, the key drivers of the longevity economy remain intact.
Peter Hughes Ph.D. is deputy portfolio manager at AXA IM longevity and biotech strategies.
