Opportunities in a greying world

Technological innovation and shifting infrastructure needs look set to drive a revolution in healthcare for a generation of retirees, potentially creating huge investment opportunities, says Mellon1, 2, portfolio manager Jim Lydotes.

The world is facing unprecedented demographic change, with the increasingly ageing populations of major markets such as the US driving major new demand for related accommodation and healthcare support, says Lydotes.

He believes this creates potentially huge opportunities in supporting infrastructure, with strong growth in projected demand for senior housing in the US just one indicator of rising global needs. According to some estimates the US healthcare real estate market is now worth over US$1trn.

Increasingly, Lydotes adds, the care homes of the past are being replaced with more comfortable living complexes catering for the varying on-site healthcare needs of residents.

"New facilities are very different to traditional retirement homes – and often have beautiful rooms and grounds. What the industry is trying to do is destigmatise the idea of moving to one of these facilities and is now looking to create what is known as a continuum of care," he says.

"It is now possible to house independent living facilities and acute care facilities all in the same complex. What this does is creates an opportunity to bring people into these residences sooner - offering them a much better living experience and from a business perspective holding on to their custom for a longer period of time. In my view, we will see a tremendous amount of new demand for independent and senior housing facilities over the next few years."

Lydotes says parallel developments in new technologies such as 5th generation (5G) mobile services and the 'Internet of things' are helping to support the healthcare needs of an increasingly ageing population. Already, he adds, personalised apps can monitor healthcare and send external alerts if their user has a fall or other dangerous healthcare event. He believes this technology could potentially underpin future diagnostic systems if overarching concerns about security of their data can be overcome.

Lydotes adds that developments in such non-traditional healthcare infrastructure are broadening opportunities for more traditional infrastructure investors. He leads the Mellon global infrastructure dividend focus equity strategy which, he adds, gains infrastructure exposure through investment in a range of healthcare and telecom related real estate investment trusts. Although some view this as non-traditional infrastructure investment Lydotes notes the strategy profile remains highly correlated with more typical infrastructure strategies.

"Even though we are taking a slightly wider view of what infrastructure is, the broader opportunity set within our strategy allows us to be more discerning about what we pay we can still deliver the same exposure people are looking for in more typical infrastructure investments.

"One of the reasons to love infrastructure is that it can often deliver a high degree of equity income. Our strategy seeks out operators with stable cash flows, offering regulatory predictability and managed by reliable asset owners. We believe getting broader exposure to the assets class could also help provide some degree of insulation from the impacts of varying interest rate environments," he concludes.


1 Investment Managers are appointed by BNY Mellon Investment Management EMEA Limited (BNYMIM EMEA) or affiliated fund operating companies to undertake portfolio management activities in relation to contracts for products and services entered into by clients with BNYMIM EMEA or the BNY Mellon funds.

2 Mellon was formed on 31 January 2018, through the merger of The Boston Company and Standish into Mellon Capita. Effective 2 January 2019, the combined firm was renamed Mellon Investments Corporation.

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Mellon was formed on 31 January 2018, through the merger of The Boston Company and Standish into Mellon Capital. Effective 2 January 2019, the combined firm was renamed Mellon Investments Corporation.