This opportunity, she adds, is growth, and growth at a time when it is scarce. If this is true then last year proved a disappointment. LO Golden Age mirrored the performance of the MSCI World index on a cumulative basis in the year to 13 February 2018, expanding by 16.2%, compared to 16.3% by its benchmark.
To be fair, Gaugler’s argument is that this demographic will be one of the themes that will generate above market growth over the mid-term. She makes a compelling argument.
“It is a numbers game,” she says. “Retirees in many industrialised countries are growing up to three times faster than the younger generation.”
This theme is only in its early stages. Baby boomers started retiring in 2010 and the last of them will probably quit work in 2030. In the US 3.7 million people will retire in each of the next 12 years.
“If you are a company addressing a customer base of a certain age then you have every chance to find yourself with an increasing number of customers as the years go by,” Gaugler says. “That, in a world where growth is difficult to find, is worth something.”
The size of the market is not the only benefit of investing in companies serving baby boomers.
They have, on average, more disposable income than younger generations. In developed countries retirees own two-thirds of net financial assets, Gaugler says, and the gap is widening.
She adds that this has expanded in the US over the past 30 years, where the disposable income of pensioners has increased by 75%. Over the same period it has halved among 33 to 44-year-olds.
Baby boomers have lived through economic booms and some of them reinvested their money. They can spend in good economic times and bad as they are less sensitive to the underlying economy. They own their home, do not have a job to lose and have something extra saved for a rainy day.
“We are not saying all old people are rich, far from it,” Gaugler says. “But usually when things go badly they weather the storm better and when things pick up they benefit more.”
She added that this is evident in the US, Europe and Japan. “By already having made their money, having more leeway and a buffer they took more risk in the financial markets and they were the ones who benefited when the markets were strong.”
