Thematic funds: What is the healthspan and why does it matter for investments in longevity?

Those who have decided to have a ‘dry January’ this year are often acting on impulse: the merry excesses of the festive season should be offset by abstinence, at least until the beginning of February. Those who also go out and buy a year's membership to the gym are taking it a step further: they are at least expressing the desire to lead an active and healthy lifestyle – in the hope of not just living better, but also living longer.

The latter may be part of a structural trend that can also be an exciting investment theme: the pursuit of healthy longevity. With the prospect that the world could have more than 2 billion people over the age of 60 by 2050, the megatrend of an ageing population is arguably the largest under-tapped market of all. After all, China has been hyped as major market and investment opportunity over the last two decades, but its population is less than 1.5bn and is expected to shrink over the next decades.

Health lags behind

The ‘healthy’ part of longevity appears to be particularly desirable and promising from an economic point of view. Life expectancy may have increased by three decades since the mid-20th century. However, it appears that health has lagged behind. For example, according to the World Health Organization (WHO) life expectancy. People might live longer, they're often often plagued by chronic illnesses towards the later years in life. In the US, the National Council on Aging calculated that 80% of people over 65 years of age have two or more chronic illnesses.

In this context, the concept of ‘healthspan’ has been thrusted into the limelight. In contrast to lifespan, it measures the time that people can enjoy in good physical and mental health. The focus is on the quality of life. The aim is to extend this as much as possible: ‘squaring the healthspan curve’ is the name of the game here, i.e. extending the healthspan curve at the as far out as possible towards the end of life (see table below). Author Peter Attia, who has contributed to popularize the subject, puts it this way: ‘You want to skate smoothly to the very end of your life, not hobble to the finish line.’

Quest for an extension of healthspan

Learning from the blue zones

However, there is much to suggest that our healthspan depends on a variety of factors, not just on our genetic make-up. As the medical journal 'The Lancet' recently noted in an article on longevity, scientists have found evidence of a complex interplay between genes and the environment in which humans operate.

In this context, research into the so-called Blue Zones has provided interesting insights. These are regions of the world that are characterized by a particularly high proportion of people aged 100 and over (centenarians). There are certainly genetic determinants of long life. In the blue zones such as Japan, for example, DNA combinations have been identified that are thought to promote longevity. At the same time, the dominant lifestyle of people in these zones is said to have at least as high of an an effect: a healthy diet, an active lifestyle and a lively social life, as well as comparatively low stress. The latter two factors can also be beneficial for mental health.

What matters most?

So, what is the key factor? Genes, social environment, modern medicine - or ultimately the individual behaviour? The American health consultancy Goinvo has combed through studies and tried to rank the hypothesized influences. According to this list, how someone sleeps, whether and how often they smoke or exercise contributes 36% to overall health. Social circumstances are also important, accounting for 24%. Genetic and biological influences account for 22% - and medical care for only 11%.

Such information could also be useful to investors interested in the investment theme of healthy longevity. However, not all health factors are equally accessible from an investor's perspective. Social health, for example, is still underrepresented in financial markets, while the healthcare sector is well established and continues to offer great investment opportunities, as recently discussed.

Healthy eating and nutritional supplements are also in the spotlight. Excessive consumption of fats, refined sugars and artificial additives are seen as a triggersfor disease. Also, excessive consumption of animal proteins, especially of red meat, as is common in many industrialized countries, is increasingly considered as being a negative contributor to a longer healthspan. Interestingly, demand for organically produced food is also growing in these regions. This is something that organic supermarket chains such as Sprouts Farmers Market can benefit from. With over 300 stores in the US, the company is one of the top three retailers in the world in this segment.

From wrinkles to Alzheimer's

The consumption of dietary supplements is also on the rise, especially in developed countries. While their efficaciousness is questioned by scientists, people hope they would prevent a wide range of ailments and signs of ageing, from wrinkles and hair loss to declining mobility and even Alzheimer's disease. According to a study by consulting firm SPINS, nearly 80% of consumers over the age of 55 in the US already take such supplements.

As long as they do little harm when used as labeled and meet stringent manufacturing specifications, authorities have so far placed few restrictions on their commercialization. Specialist companies such as the UK-based Haleon have already established themselves in this growth market - it is worth noting that Haleon was formed by the merger of divisions of the international pharmaceutical giants GSK and Pfizer.

Finally, active lifestyle service providers offer a wide range of investment opportunities. The outdoor and sports equipment on offer is by no means exclusively aimed at an older clientele. This again points to the long-term nature of the investment theme. This is evident, for example, in the case of Swiss clothing and running shoe manufacturer On, which now counts the US across all age demographics as its largest sales market. But it also brings to mind the 'Silver Economy', which caters more to older consumers, such as wellness providers, hotels, restaurants and travel. To this end, the company OneSpaWorld, which is by far the leading wellness service provider for cruises and increasingly for resorts, promises to be a long-term structural winner.

Active and diversified investment

It is clear that the concept of healthy ageing is far from being fully understood, and investing in the various health factors requires a great deal of expertise. Accordingly, actively managed investment strategies with diversified investments can be used to exploit the presumed potential. The Asset Management of Zürcher Kantonalbank, for example, focuses on several sub-areas of the 'Swisscanto (LU) Equity Fund Healthy Longevity' that may be of interest in terms of healthy life expectancy: healthy lifestyle, healthcare and silver economy products and services.

Investment theme «Healthy Longevity»: Insights