Magazine article The Spectator

Freddy Gray: The Demographic Goldmine

Magazine article The Spectator

Freddy Gray: The Demographic Goldmine

Article excerpt

Demography is destiny, they say, and if that's the case then Britain's future looks wrinkled and grey. Today, one in six Brits is over 65. By 2050, on current trends, it will be one in four. There are now three million octogenarians living here, a figure that is expected to double by 2030 and reach eight million by 2050. Retirement? Sorry, dears. The government will have to keep pushing back the state pension age, so many of us should expect to carry on working until senility or death intervenes.

It's grim stuff. But here's the good news: geriatric Britain presents a huge investment opportunity. It's hard to think of a safer bet, in fact: unless we introduce mass euthanasia (step forward Lord Falconer!) healthcare costs must rise and rise. As individuals and taxpayers, we will have to fork out more on nursing, pain relief and medicine. Dementia is a total banker, for instance, and the profits of incontinence pad makers won't dry up either.

Care homes represent the biggest and most obvious golden goose. The trouble, though, is that it's hard for the average 'retail' investor to get a slice of the action. Private equity groups dominate, squeezing the margins of this vital service for their guaranteed returns. Most of these funds go through a 'prop-co op-co' model: a property company, usually a real estate investment trust, develops, maintains and leases out the care facility, and a separate operating company deals with the gerries and their bed sores.

In 2011, Southern Cross, a FTSE 250 operating company with property interests, over-leveraged itself and went bankrupt. One investment arm's loss was another's gain, however, and some vast and conspicuously anonymous American healthcare equity groups sank their teeth into the vulnerable British market. It's all globalisation and consolidation -- none of which much helps the everyday punter looking for a comforting profit amid the depressing facts of life. …

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