The effect of an ageing population on healthcare and senior housing is an easy story for investors to follow, and should be one to look out for over the next five years, according to Quay Global Investors.
Speaking to Money Management, Chris Bedingfield, portfolio manager of Quay Global Real Estate fund, said it had become customary for fund managers to provide one-year return expectations at the start of the year, but that it was difficult to get this right.
Bedingfield had instead opted to offer a five-year outlook, because “if you're patient, and you back those long-term themes, you can forget about interest rates, short term inflation or who's going to win the next election”.
Following demographics stories was one of the easiest ways for investors to predict long-term outcomes, said Bedingfield, because it mattered less what central banks or governments would do over the next few years – especially in private sector real estate.
“So, what we're saying is for senior housing, particularly in the North America, which is where we have our exposure, the rubber really hits the road when people start turning around 80 years of age,” he said.
“That's when they start needing some sort of moderate care in a senior housing facility.”
He said baby boomers would start to hit their 80th birthdays five years from now, which would create a secular tailwind lasting decades.
Europe trailed Canada, the United States and Australia in terms of its ageing population, partly because its baby boom happened later after the end of the second world war, said Bedingfield.
“So, it's not generic, it's not universal, it's definitely geographic,” he said.
From the perspective of this thematic, it was “good news” that people had stopped building these facilities because of COVID, according to Bedingfield.
“So that’s an absolute perfect storm coming from a multi-decade generational, once in a lifetime demographic theme that's going to meet head on with collapsing supply,” he said.
“And as a real estate investor is music to our ears.”