More than half (60 per cent) of investors view demographic change, such as ageing population growth and the rise of younger investors, as an opportunity.
BNP Paribas's latest survey of 135 institutional and intermediary investors in Europe, Asia and the US sought to understand investor perspectives on demographic change.
It revealed that only 20 per cent see the changing demographic as a risk.
Investors view new technologies (95 per cent) and ageing populations (91 per cent) as the most important changes shaping their investment strategies.
This was followed by 86 per cent of investors citing population growth in emerging markets.
BNP Paribas chief executive, Sandro Pierri said the survey findings show the interlinked relationship between demographic shifts, asset allocation considerations and the “ever-quickening” pace of technology and the focus on sustainability.
In Pierri’s view, a fundamental re-allocation of capital is required.
“This will need deep transformation in the investment industry to cater for issues such as funding the pension gap, moving from wealth creation to wealth preservation adapted to clients’ risk profiles, or providing for a more digital way of investing.
“While this presents challenges, it also creates new opportunities. Identifying the sectors set to solve these challenges and selecting the appropriate strategies can uncover long-term investment opportunities,” Pierri said, adding that BNP Paribas is already seeing a shift to thematic investment.
Pierri attributes this shift to clients seeking to address specific challenges and tap into longer-term trends.
“As a result there was a mix of preferences for taking on increased and decreased investment risk in the future,” Pierri said.
Investor preference in Asia was for less investment risk (39 per cent), compared with increased investment risk expected in the US and Europe (both 17 per cent).
By region, investors in the US said demographic change impacted their asset allocation the least.
Some 42 per cent of US investors indicated demographic change has already impacted asset allocation, compared to 78 per cent of those in Europe and 83 per cent in Asia.
The impact was most pronounced among intermediary investors, with 86 per cent indicating it had already been factored into investment choices, compared with 69 per cent of institutional investors.
Asset classes most likely to benefit
Healthcare and technology were viewed as the sectors most likely to benefit from these changes.
Healthcare was viewed as the single most important investment theme for clients, with 91 per cent citing it as significantly attractive.
This was followed by technology (84 per cent), energy (67 per cent), agri-food (63 per cent), leisure & tourism (60 per cent) and real estate (59 per cent).
BNP Paribas said the growing attractiveness of healthcare and technology is linked to the pandemic and climate change.
For institutional investors, equities (52 per cent), real estate (50 per cent) and infrastructure (47 per cent) were viewed as the asset classes most likely to benefit from allocations as a result of demographic change.
Meanwhile for intermediary investors, thematic investment was top at 63 per cent, followed by equities (53 per cent) and infrastructure (47 per cent).
The results showed broadly equal preferences for changing allocations to active and passive strategies over the next 10 years, and across all regions.
In terms of regional differences, 51 per cent of investors in Asia viewed emerging market population growth as an ‘extremely important’ aspect of demographic change for investment strategy, compared to 21 per cent in Europe and 15 per cent in the US.
Elsewhere, investors in the US place a greater importance on diversity and equality, with 30 per cent deeming it to be ‘extremely important’, compared to 24 per cent of investors in Asia and 17 per cent in Europe.
jane.matthews@ft.com
