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How demographic change is impacting asset allocations

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Demographic changes around the globe are forcing asset allocators to question and update their strategies – with the surge in new technologies top of the list for shaping new opportunities.

That’s according to new research from BNP Paribas Asset Management, conducted by Coalition Greenwich, which said 95% of respondents cited new tech as an important change, followed by ageing populations at 91%.

About three-quarters of those surveyed said demographic change had already impacted asset allocation decisions, while 60% said they viewed the changes as an investment opportunity.

About 20% said the changes were a risk, however, and as a result there was a mix of preferences for taking on increased and decreased investment risk in the future.

BNP said investor preference in Asia was for less investment risk (39%), compared with increased investment risk expected in the US and Europe (both 17%).

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After tech and age, changes in consumer spending habits (89%) and population growth in emerging markets ranked high on the scale of important demographic changes.

Healthcare was identified by almost all investors (91%) as significantly attractive, followed by technology (84%), energy (67%), agrifood (63%), leisure & tourism (60%) and real estate (59%).

Healthcare was seen as more important in Europe and Asia (both 95%) compared to the US (75%), the research said, while technology, telecoms and IT were more important in Asia (93%) compared to Europe (81%) and the US (75%).

For investors in Asia, emerging market population growth was deemed an ‘extremely important’ aspect of demographic change for investment strategy by half of respondents (51%), compared to 21% in Europe and 15% in the US.

Diversity & Equality was deemed to be an ‘extremely important’ aspect by 30% of US investors, compared to 24% in Asia and 17% in Europe.

Sandro Pierri, CEO of BNP Paribas Asset Management, said, “The results of the survey highlight the significance of demographic and societal changes, and their investment implications.

“The findings also show the extent to which demographic shifts and asset allocation considerations are interlinked with the ever-quickening pace of technology and the focus on sustainability, which requires a fundamental re-allocation of capital.

“This will need deep transformation in the investment industry to cater for issues such as funding the pension gap, moving from wealth creation to wealth preservation adapted to clients’ risk profiles, or providing for a more digital way of investing.

“While this presents challenges, it also creates new opportunities.  Identifying the sectors set to solve these challenges and selecting the appropriate strategies can uncover long-term investment opportunities.

“At BNP Paribas Asset Management, we are already seeing a shift to thematic investment as our clients seek to address specific challenges and tap into longer-term trends as part of a diversified investment strategy.”

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