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Finland’s aging population provides investors with opportunities for returns as companies find ways to profit from pensioners’ longer lives and rising wealth, according to Amlan Roy, a managing director at Credit Suisse Group AG. (CSGN)
“Sectors, which are very, very good are pharmaceuticals and biotechnology,” Roy said in an interview in Helsinki yesterday. He is the head of global demographics and pension research at Credit Suisse.
People tend to consume more medicines and require more medical treatment as their lives lengthen. Globally, people at the age of 60 could expect to live another 19 years in 2009, according to the World Health Organization. In Finland, the population is aging at the fastest rate in Europe as people born after the World War II reach retirement age.
Orion Oyj (ORNBV), a Finnish drug maker, has been reaping profits from its Parkinson’s disease drug, whose patents begin to expire this year. The disease is more common in the elderly.
Biohit Oyj (BIOBV), based in Helsinki, is focusing on diagnostics, as it foresees strong growth in the need for safe and cost- effective tests as the population ages, the company said in a statement on March 21. Biohit shares have climbed 29 percent this year. Finnish food company Raisio Oyj (RAIVV) makes Benecol, a cholesterol-reducing compound sold in about 30 countries.
“People in their old age should also have a very balanced lifestyle, where they’re helping their grandchildren, they’re helping society, they’re passing on knowledge and also remaining physically and mentally engaged,” Roy said. “That’s a win-win for everyone.”
Financial services will also have a growing focus on the elderly, as the wealthiest people in Europe are 65 to 74 years old, he said.
“We need to rethink from the biggest trillion-dollar funds to boutiques -- insurance products, savings products, re- insurance products for people who are aged 65 and living until 90,” Roy said. “They want healthy post-retirement lives.”
As well as investing their funds, retirees will have money to spend to enhance their everyday lives.
“We’re bullish on leisure and luxury,” Roy said. “Tourism can be a very vibrant sector.”
Even as the growing number of pensioners spend money, the costs of caring for them will become a drain on state coffers. By 2015, three working Finns will be supporting every pensioner, down from about four now, according to the European Union’s statistics office. That would be the fastest shift in worker-to- retiree dependency in Europe.
Governments must act to cut the cost of caring for the elderly to ensure a sustainable fiscal future, Roy said. In the northernmost euro member, the shrinking workforce means the economy’s potential growth rate will fall to about 1.5 percent a year, slower than the average 3.3 percent growth in the decade to 2008, the Finance Ministry has said.
Combined spending on pensions, health care and services, such as assisted living, will rise to 24.3 percent of gross domestic product by 2060 from 18.2 percent in 2010, he said.
“We should be reducing these numbers,” Roy said. “Countries should strive for the 10 to 12 percent range over the next 18 to 20 years.”
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