BNP Paribas Asset Management (“BNPP AM”) unveils the main findings of its latest survey conducted by Coalition Greenwich on the impact of demographic change on asset allocation decisions.
- 74% of respondents indicated that demographic change has already impacted asset allocation decisions.
- 95% cited new technologies as a major change shaping their investment strategies, followed closely by an aging population (91%).
- 60% of investors see demographic change as an investment opportunity.
The story behind Buffett’s love of the Western
In mid-August, the Federal Energy Regulatory Commission (FERC) authorized Berkshire Hathaway Inc to purchase up to 50% of the common stock of oil company Occidental Petroleum Corp. Berkshire, which is controlled by Oracle of Omaha Warren Buffett, has been aggressively buying shares in the oil company for a year. The size Read more
The survey found that demographic change has impacted asset allocation decisions for three-quarters (74%) of investors over the past three years and almost all (95%) believe it will greater influence on investment decisions over the next decade.
By region, 42% of US investors indicated that demographic change has already impacted asset allocation, compared to 78% in Europe and 83% in Asia.
The impact was most pronounced among intermediate investors, with 86% saying it had already been factored into investment choices, compared to 69% of institutional investors.
Main demographic and societal changes likely to impact investment strategies
Almost all investors surveyed (95%) cited the acceleration of digital and new technologies as a significant change shaping their investment strategies, followed closely by the impact of an aging population (91%), in consumer spending habits (89%) and population growth. in emerging markets (86%).
These results also reflect the most attractive sectors identified by the respondents. Healthcare was identified by almost all investors (91%) as significantly attractive, followed by technology (84%), energy (67%), agribusiness (63%), leisure and tourism (60%) and real estate (59%). Their growing attractiveness is also linked to the pandemic and climate change.
Main regional differences:
- Health care was considered more important in Europe and Asia (95% each) than in the United States (75%).
- Technology, telecommunications and computing were more important in Asia (93%) than in Europe (81%) and the United States (75%).
- For investors in Asia, population growth in emerging markets is seen as an “extremely important” aspect of demographic change for investment strategy by half of respondents (51%), compared to 21% in Europe and 15% in the USA.
- Diversity and equality are rated as “extremely important” by 30% of US investors, compared to 24% in Asia and 17% in Europe.
Asset classes most likely to benefit
Institutional investors indicated that equities (52%), real estate (50%) and infrastructure (47%) were the asset classes indicated as most likely to benefit from allocations due to demographic change, while that for intermediate investors, thematic investing was in the lead. (63%), followed by Equities (53%) and Infrastructure (47%).
The results showed broadly equal preferences for changing allocations to active and passive strategies over the next 10 years, and across regions.
Risk or opportunity?
Demographic change was identified as an investment opportunity by almost 60% of investors surveyed and as a risk by 20%, and as a result there was a mix of preferences for taking increased and reduced investment risk at the future.
Investor preference in Asia was for lower investment risk (39%), compared to expected higher investment risk in the US and Europe (17% each).
Sandro Pierri, CEO of BNP Paribas Asset Management, comments:
“The survey results highlight the importance of demographic and societal changes and their investment implications.
The results also show how demographic shifts and asset allocation considerations are tied to the ever-faster pace of technology and the focus on sustainability, which requires a fundamental reallocation of capital.
This will require a profound transformation of the investment industry to address issues such as funding the pension deficit, shifting from wealth creation to wealth preservation tailored to clients’ risk profiles, or setting place of a more digital mode of investment.
“While this presents challenges, it also creates new opportunities. Identifying sectors poised to address these challenges and selecting appropriate strategies can reveal long-term investment opportunities.
At BNP Paribas Asset Management, we are already seeing a shift towards thematic investing, with our clients seeking to address specific challenges and exploit longer-term trends as part of a diversified investment strategy.