Remarkable global population growth, a problem or an opportunity for asset managers?
Written by Marc Wiese, General Manager of Warwick Private Clients
One of the most conspicuous facts about our planet is that it took nearly 4.5 billion years for the human population to reach 1 billion some 200 years ago. According to the United Nations most recent statistics we now share the planet with more than seven billion human inhabitants. Clearly there has been an extraordinary expansion in global population of late, with approximately 6.5% of all humans ever born living today.
What then are the expectations for the future? Based on a study done by Max Roser and Dr Esteban Ortiz-Ospina from the publication “Our World In Data”, population growth has slowed since 1962. The authors expect global population to grow at a progressively slower rate until 2100, at which time it will peak.
The question then arises, if the global population growth is expected to continue for the next 80 years, where should asset managers invest in order to maximize returns for an ever-increasing population? As the global population growth is not expected to positively influence all geographic areas or all economic sectors, one needs to carefully consider numerous factors. As global investors, we need to consider a global population of 9, 10 or even 11 billion and how portfolios should be structured to take advantage of emerging opportunities.
Opportunities are expected to be focused on industries such as waste management, food production and distribution, water purification, innovative technologies and last but not least, health care. Notably, the average person over the age of 85 uses about nine times as many health care products as an individual under the age of 65.
Crisis always has the potential to create opportunity, as was the case with the last world war, for example, nuclear energy and jet planes were created. More recently, the relative scarcity of fossil fuels has created huge investment into renewable energy. Man-made problems also generate man-made solutions, with increased investment in research and development, new innovative technologies are providing exciting possibilities.
The next important factor to consider is where will most population growth occur? The bulk of the population growth projections are attributed to high fertility areas such as Africa, or other countries with already large populations. Studies done by the United Nations have indicated that more than 50% of the population growth over the next 30 years is expected to come from nine countries: India, Pakistan, Democratic Republic of the Congo, Ethiopia, United Republic of Tanzania, United States of America, Indonesia and Uganda. This does not, however, mean that investors should focus only on these countries for investment opportunities.
Warwick’s focus is a dual investment philosophy, focusing neither on value or growth alone, but rather both. Extreme deep-value investors may be biased to developing nations for growth opportunities. We, however, believe a holistic approach must be adopted, analyzing the advantages of population growth of countries, their economies, infrastructures, political structures and stability.
The challenges faced by the burgeoning global population growth will, in turn, provide persuasive investment opportunities around the world. And while the current investment atmosphere is clouded by political instability, volatility and fear of risk, this also creates the opportunities for enormous growth and investment returns! At Warwick, we identify such opportunities, by following a globally diversified approach to investing, in order to get the best possible risk-adjusted return for our clients over the long term.