ElderCare – A Viable Investment Sector?

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​As my parents age, I’ve become more aware the vulnerability of the elderly and how even small things can make a difference to the less spry. It is endearing to see the appreciation given when an older person needs a seat on a train and someone gives that seat. However that small act of benevolence is a far cry from caring for someone with Alzheimer's, which many millions do daily. With the latest technology boom, encompassing the sharing economy, internet of things, big data and smart-phones as health monitors – old age for the elderly themselves, their families and the care-givers should be easier to cope with and with a better quality of life for all?

As an investor – one always looks to be part of a macro trend, especially one where you can do well by doing good, and one thing is for sure – we will all be affected by this if not through family, then as we age ourselves. Taking part in this trend before we join the elderly ourselves is surely a most sensible act.

Some Boring Statistics To Make A Point - We Are Getting Older :) No Seriously…

Life expectancy around the world is increasing in both developed and emerging markets. By 2050, the world’s population aged 60 years and older is expected to total 2 billion, up from 841 million today. With increased urbanization, people are adopting a more sedentary lifestyle leading to increased obesity and diabetes. The middle class continues to grow and will fuel increasing demand for more health options. According to the World Health Organization, chronic disease prevalence is expected to rise 57% by the year 2020.

The global wellness/ ancillary market size is currently $1.49 trillion and expected to grow in line with the population growth. 1 billion by more people by 2025 or which 300m will be over 65 years old (source 5: UN data).

A good example of this global trend is in China where it is actually more serious
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​China's working age population has started shrinking and it is going to have a huge over-65 population in the near future — meaning that it will see the same kinds of problems as ageing developed markets like Japan.  How the younger population supports a growing ageing population?

Thus, healthcare demands seen worldwide will be accentuated in China – exacerbated by the one-child-policy.
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It is projected that China's population of the elderly will grow substantially by 2050 due to the previous govt's one-child only policy which was recently abolished. 

​All of This Leads to Huge Business Opportunity: Technology, Private and Public Partnerships as The New Models of Care

Governments will be faced with a huge challenge to take care of their ageing populations, along with the accompanied increase in chronic disease management needs. They will be faced with growing needs in hospital care and out-patient care however with a smaller tax-paying working population to support this. Add to this, the huge issue of underfunded pensions in general; worsening as worldwide yields decrease still further and exacerbated by “Defined Benefit” schemes which are a lot more expensive as life expectancy increases. Governments will look to the private sector to fill the gap in healthcare at lower costs and then try regulate them. 
The healthcare industry worldwide has taken notice and new delivery models are emerging to address growing chronic care and elderly care demands. Technology has a key role to play to make this more cost effective. Advancements in precise detection and diagnoses of disease will go far to minimise the cost of treating chronic conditions. The increase in the proliferation of smart-phone and mobile health care will also be a key factor in remote detection and management of health. In 2012, the global market for mobile health was valued at $1.95 billion and is expected to grow at a compound annual growth rate of 47.6 percent from 2014 to 2020.

​Is ElderCare a Viable Investment Theme?

Does elderly care constitute a justified investment theme? By that I mean - do dedicated pure-plays investment vehicles make sense? (i.e. like we have now in SaaS, biotech, ecommerce) Or is it more a macro play that will affect the economy as a whole?

To constitute a deserved specialism, experience in that one area must be vital to performance – (i.e. a specialist can do so much better than a generalist). As an example cleantech had so many areas everyone in the end has to be a generalist (e.g. cleantech comprised of: energy generation, energy efficiency, clean materials, electric vehicles, data-management, new products, water conservation, water recycling, recycling –  many of these have little in common ranging from infrastructure to new products development).
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It is the same with elderly care – it encompasses the whole economy – food, care, travel, monitoring products, tech-wearables, home automation. I see it more as a macro force which will cause adjustments in many products and services in the economy as a whole. However many subsectors and specialized investment areas will also boom as a direct result.

How to Partake in the Macro Trend of an Ageing Population?

Listed equities focused on the elderly
Are there any pure play indexes on the stock market?
There is at least one based on a basket of stocks from the S&P. Unfortunately, it is underperforming the S&P year to date however as with any macro trends – the target is the long-term. This index:
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Motif Investing Index 
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Includes stocks in assisted living, Diabetes care, medicare insurers, orthopedic care products, retirements homes. Also, nowadays you can construct your own index with stocks which focus on elderly care homes or tech companies related to the elderly. Here are three US examples that could be used from Fool.

Fool ElderCare Index 
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Excerpt:

1. HCP is a real estate investment trust, or REIT, focused exclusively on the healthcare sector. HCP's real estate portfolio includes hospitals and medical office buildings, along with senior living facilities.
2. Kentucky-based Almost Family was founded nearly 40 years ago. The company is the fourth-largest home healthcare provider in the United States with over 250 branch locations in 14 states.
3. If you live in the Sun Belt, you might be familiar with Ensign Group. Currently, its portfolio includes 204 healthcare facilities, ranging from skilled nursing, home healthcare, hospice care, assisted living and urgent care companies--many in Sun Belt states.    

By far the easiest way to get exposure to the macro trend is through listed companies – what premium do you pay for partaking in the macro trend? now that’s where it gets tricky and deep fundamental analysis is required. 

Private equity focused on the elderly

Are there any pure plays funds? No however many PE funds are now investing in care homes (and some causing some controversy as they go).

Examples are:
Bridgepoint invested in Care UK in 2010 – 85 care-homes, 17,000 clients.
Blackstone  - southern cross, UK

How to get exposure to this trend? For the retail investor - not possible. HNWs and Family offices yes.

This area of investing will draw the greatest analysis from the government as these are profit making entities in an area that the government really feels they need to monitor for the good of all – health and education draw this type of attention and rightly so. As always the private sector will cater to the sharp end of the pyramid, where people can afford to pay a premium. The base of the pyramid for care will need to be run by or subsidized the governments. And here is where costs will be keenly felt - and this is where VC has a role to play. Better care at a lower cost through technology keeping people at lower cost in their own homes for longer where everyone is happier.

VC focused on the elderly

Are there any pure plays? Not yet, however funds are viewing this as a genuine macro trend which will boost the returns of many of their portfolio companies. The trick will be to an elderly focus designed in to any new hardware or software from the start – catering for ease of use as people struggle with loss or hearing, sight and dexterity. 

How to get exposure to this trend? Through VC funds that have it as part of their prospectus – I am yet to see a dedicated elderly technology fund.
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Honor co-founders Sandy Jen, Cameron Ring, Monica Lo and Seth Sternberg created a policy of giving their on-demand caregivers stock options and benefits to differentiate themselves from other on-demand companies that were taking advantage of their contracted employees. 

​VC-backed Technologies Focused on the Elderly which will come to the Forefront

*There are numerous technology examples from self-driving cars to remote health monitoring and diagnosis through wearables. Edema socks automatically measure and log swelling of the legs of sufferers. The wearer’s doctor is automatically notified if measurements trigger an alarm. Same idea for diabetes socks. Self-driving cars will enable the elderly to be mobile again safely and without fear. Here are more examples.

Technology for Seniors 

Smart homes with voice controls – again a product that is not aimed at the elderly alone however the User Interface will surely have to work for people as they become harder of hearing, seeing with restricted movement thus needing even more automation through machine learning.
A novel example from the valley is elderly home care job site – Honor  (founded 2014) which recently took in $42m of investment including capital from Andreessen Horowitz. This is a marketplace for caregivers vetted by families with the aid of Honor.

Another example is Care.com, founded in 2006 by Sheila Lirio Marcelo,  which is an all service site that helps families find care for all sorts of situations, including senior care and has a revenue of 60 million USD per year. 

All of these technologies can be part of updated care homes – or even allow the elderly to live at home for much longer safely. The communications may have the largest impact as loneliness is one of the most feared aspects of getting old.

Impact investing focuses on the third world and social mobility to a large degree– caring for the elderly has a claim to be part of the impact investing genre. We will all feel the benefits one day as the infirmity of our own old age becomes more real.

​By John Rowland