In its new study by Coalition Greenwich, BNPP AM notes that 74% of investors indicate that changing demographics have already had an impact on their asset allocation decisions.
BNP Paribas Asset Management (BNPP AM) presents the main findings of its latest survey by Coalition Greenwich on how changing demographics are influencing investment and asset allocation strategies.
- 74% of investors surveyed indicate that changing demographics have already had an impact on their asset allocation decisions.
- 95% of them consider new technologies as an important societal change that shapes their investment strategies, followed closely by the aging of the population (91%).
- 60% of investors believe that demographic trends are an investment opportunity.
Over the next ten years, the asset management industry will experience a period of profound change, where several major structural forces will operate simultaneously: in addition to issues related to sustainable development, technological disruption and the geopolitical context, the omographic change and its impacts are a trend that can really influence investment strategies. BNP Paribas Asset Management conducted this study in order to better understand the behavior and outlook of investors in the face of major demographic and societal trends, such as the aging of the population in developed countries, the rise of a young generation of investors or the rise of a middle class in emerging markets.
The results of the study indicate that over the last three years, demographic changes have impacted the asset allocation decisions of three-quarters of investors (74%), although this opinion differs according to geographical areas: only 42% of North American investors share this statement, compared to 78% in Europe and 83% in Asia. Distributors are also more likely to think so (86%) than institutional investors (69%). However, the outlook is unanimous with nearly all investors (95%) predicting greater influence from demographic trends over the next decade.
What demographic and societal changes are likely to influence investment strategies?
Among the various aspects of demographic and societal change, almost all investors surveyed (95%) cited the acceleration of new technologies as a significant change influencing their investment strategies, followed closely by the impact of aging population (91%), changes in consumer habits (89%) and population growth in emerging markets (86%).
Consequently, several business sectors are likely to benefit from these developments. Among the most attractive, the health sector was identified by a large majority of investors (91%), followed by technology (84%), energy (67%), agrifood (63%), leisure and tourism (60%) and real estate (59%).
Several regional differences should be noted:
- Health is considered an attractive investment sector in Europe and Asia (each 95%) compared to 75% in the United States. The technology is more popular in Asia (93%) compared to Europe (81%) and the United States (75%).
- For Asian investors, population growth in emerging markets is seen as an “extremely important” aspect of demographic change by half of respondents (51%), compared to 21% in Europe and 15% in the United States.
- The aging of the population is also preponderant in terms of investment strategy, with 70% of Asian investors for whom this is an “extremely important” element (compared to 39% in Europe and 40% in the United States). United).
- In the United States, the emphasis on diversity and equality is seen more as an “extremely important” aspect of demographic and societal changes (30%), compared to 24% in Asia and 17% in Europe.
Which asset classes are most likely to benefit?
Institutional investors indicated that equities (52%), real estate (50%) and infrastructure (47%) were the asset classes most likely to benefit from allocation strategies due to changing demographics , while for distributors, thematic investing is in the lead (63%), followed by equities (53%) and infrastructure (47%). The choice between active versus passive strategies is evenly distributed since no preference stands out in all regions.
Demographic change: risk or opportunity?
Demographic changes were identified as an investment opportunity by nearly 60% of investors surveyed and as a risk by 20% of them. Over the long term, preferences for taking investment risks vary, with a predominance for less risky strategies in Asia (39%), and more risky in the United States and Europe (both 17%) .
Sandro Pierri, CEO of BNP Paribas Asset Management comments: “The results of our survey underline the importance of demographic and societal changes, as well as their impact on investment. These lessons also show us to what extent demographic changes and allocation decisions are intimately linked to the ever-accelerating development of technology and the importance placed on sustainability. A profound transformation of the asset management industry and the fundamental reallocation of capital are necessary to meet the challenges linked to the financing of pensions, or to the establishment of a more digital mode of investment.”
“While demographic trends present certain challenges, they also create new opportunities. Identifying sectors ready to successfully face these challenges and choosing the right strategies can help identify long-term investment opportunities. At BNP Paribas Asset Management, we are already seeing a shift towards thematic investing, with our clients looking to take advantage of long-term underlying trends as part of a diversified investment strategy.”