Investing in thematic funds: Senior living is far from old news
With demographics in mind, safe and assisted living for an aging population is becoming increasingly important. The U.S. is far ahead in this trend thanks to specialized real estate providers: Portfolio Managers Chi Tran-Brändli and Clément Maclou explain why these companies are currently coming into focus when investing in thematic funds focused on healthy longevity.
Authors: Clément Maclou, Lead-Portfoliomanager, and Chi Tran-Brändli
Amid all the uncertainties brought about by the massive increase in import tariffs in the U.S., one thing is certain: the American domestic economy is becoming even more of a focus for investors worldwide. The hope is that companies there might not directly affected by the ever-expanding trade dispute.
This also draws attention to a market sector that may be known only to some professional investors outside the U.S. – namely, real estate specifically designed for senior living. This segment, known locally as "Senior Living Real Estate" (see box below), has experienced turbulent times in recent years due to the COVID-19 pandemic and rising interest rates in the U.S. However, investment activity in the sector has significantly increased since 2024.
The global real estate specialist JLL now expects the positive trend to continue in 2025. This is indicated by strong investor interest and rising rents for senior living, according to a recent outlook. The global trade dispute now adds another argument in favor of this trend.
Specialists in senior living
By 2050, the world could have more than 2 billion people over the age of 60. This will result in a growing demand for assisted senior living, according to recent forecasts by McKinsey & Co. Currently, the consulting firm calculates that only about 5% of the senior population in Australia, Canada, New Zealand, and the USA live in senior housing. Therefore, more offerings are urgently needed – and the United States is leading the way in specialization: there, real estate investment trusts (REITs) provide the living spaces, which are then operated by senior care providers. Our analysis focuses on these REITs.
Long-Term drivers for senior living
It's high time for investors interested in thematic funds focused on healthy longevity to take a closer look at the potential of senior living. In our opinion, this seemingly niche segment fits perfectly with the long-term investment theme of "Healthy Longevity."
This is especially true given that long-term drivers, in our opinion, also support the opportunities for the senior living theme in the U.S. – while market, interest rate, and economic risks must also be considered.
For instance, the oldest cohorts of the post-war "Baby Boomer" generation are now reaching their 80s. In the coming years, the Organization for Economic Cooperation and Development (OECD) expects strong growth in the over-80 population in the U.S. (see the chart below). Conversely, according to the American Pew Research Center, the number of caregivers from within the family – typically aged 45 to 65 – could rapidly decline by 2040 due to the same demographic reasons.
Accelerated Growth of the Over-80 Population in the U.S.
Growth of the Over-80 Population in the U.S. (in millions)
All this points to a increasing demand for specialist-assisted senior living in purpose-built properties. However, American seniors currently face a problem when searching for such offerings: these properties are increasingly in short supply in the U.S.
Thousands of Senior Living Units Needed
Construction activity in the senior living segment has significantly declined in recent years (see the chart below). A supply shortage appears inevitable, at least in the medium term. According to the U.S. data service NIC MAP, more than 560,000 new units are needed to meet the expected demand by 2030. However, at current development rates, only 191,000 units are expected to be added by then.
One consequence is rising rents – and indeed, rental prices have already increased by a factor of 1.7 since 2008, according to surveys by the U.S. Federal Reserve (Fed). Given that those aged 65 and older in Western countries like the U.S. are wealthier than any previous older generation, rent growth is unlikely to hit a ceiling anytime soon.
Shrinking Supply of New Senior Housing
Senior Housing Under Construction in the U.S.
Industry heavyweights have therefore already begun to accelerate growth last year. For example, Welltower invested over $6 billion in real estate acquisitions by the third quarter of 2024; Ventas REIT also prioritizes such acquisitions. Both companies reported occupancy rates of well over 80% at the end of 2024. This occupancy and the expected demand overhang should also mitigate the risks that investors in commercial real estate often face: such as the impact of rising interest rates or economic fluctuations.
Important Driver in Investing in Thematic Funds for Healthy Longevity
Thus, investments in the Healthy Living sector can represent an interesting component when investing in thematic funds focused on healthy longevity. However, it is also important to keep the big picture in mind: our expert teams have divided the investment theme into four sub-areas. The focus is on companies that, in our opinion, offer the best solutions in the areas of Healthy Lifestyle, Health Efficiencies, Healthcare Innovations, and the Silver Economy. We categorize the senior living theme under the Silver Economy, where the consumption behavior of the older population is the main focus.
At the same time, the senior living theme exemplifies the importance of demographics for the growing demand for products and services in the healthy longevity sector. Although it acts as a driver relatively slowly, it is unlikely to lose momentum in the coming decades. However, the theme is highly complex. Therefore, actively managed funds by expert teams, such as the "Swisscanto (LU) Equity Fund Sustainable Healthy Longevity," can offer added value.
Investment theme «Healthy Longevity»: Insights
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This document only serves advertising and information purposes and is not directed at persons in whose nationality or place of residence prohibit access to such information under applicable law. Where not indicated otherwise, the information concerns the collective investment schemes under the law of Luxembourg managed by Swisscanto Asset Management International S.A. (hereinafter "Swisscanto Funds"). The products described are undertakings for collective investment in transferable securities (UCITS) within the meaning of EU Directive 2009/65/EC, which is governed by Luxembourg law and subject to the supervision of the Luxembourg supervisory authority (CSSF).
This document does not constitute a solicitation or invitation to subscribe or make an offer to purchase any securities, nor does it form the basis of any contract or obligation of any kind. The sole binding basis for the acquisition of Swisscanto Funds are the respective published legal documents (management regulations, sales prospectuses and key information documents (PRIIP KID), as well as financial reports), which can be obtained free of charge at https://products.swisscanto.com/. Information about the sustainability-relevant aspects in accordance with the Regulation (EU) 2019/2088 as well as Swisscanto's strategy for the promotion of sustainability and the pursuit of sustainability goals in the fund investment process are available on the same website. The sub-fund referred to in the document is subject to Article 9 of Regulation (EU) 2019/2088.
The distribution of the fund may be suspended at any time. Investors will be informed about the deregistration in due time. The investment involves risks, in particular those of fluctuations in value and earnings. Investments in foreign currencies are subject to exchange rate fluctuations. Past performance is neither an indicator nor a guarantee of future success. The risks are described in the sales prospectus and in the PRIIP KID. The information contained in this document has been compiled with the greatest care. Despite professional procedures, the correctness, completeness and topicality of the information cannot be guaranteed. Any liability for investments based on this document will be rejected. The document does not release the recipient from his or her own judgment. In particular, the recipient is recommended to check the information for compatibility with his or her personal circumstances as well as for legal, tax and other consequences, if necessary, with the help of an advisor. The prospectus and PRIIP KID should be read before making any final investment decision.
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The products and services described in this document are not available to U.S. persons under the relevant regulations (in particular Regulation S under the U.S. Securities Act of 1933). Data as at (where not stated otherwise): 11.2024
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