Americans are aging and that is creating opportunity for savvy investors.
With about 46 million Americans over the age of 65 — a number expected to double over the next 25 years — families, health care providers and patients are having to adapt to managing chronic health conditions, accessibility and good quality of life.
In a study by America’s Research Group, 72 percent said they would do everything possible to avoid staying in a traditional nursing home. Caregiving is one of the biggest job growth sectors and 14 percent of adults in their 40s and 50s have cared for an aging parent or elderly family member, according to the Pew Research Center. Most others expect to care for an aging family member.
Technology, real estate and other investments geared toward meeting the needs of older Americans, then, can help make life easier in the future. If you’re interested in getting in on them, consider the following.
[See: 9 Stocks to Buy for the Aging Baby Boomer Market.]
Invest in broad funds with good exposure to the long-term and senior care market. Real estate investment trusts offer investments in senior housing, says Erika Jensen, president of Respire Wealth Management in Houston.
She recommends examining exchange-traded funds, including Vanguard’s REIT ETF (ticker: VNQ), which has an allocation of 16 percent residential real estate and 12 percent health-care facilities. It has an expense ratio of 0.11 percent, or $11 per $10,000 invested.
“There’s a lot of exposure there while still having diversification,” she says, with the added benefit of dividends.
There’s also funds for senior housing development communities such as Welltower ( HCN), Sun Communities ( SUI), HCP ( HCP) and Senior Housing Properties Trust ( SNH).
“Just owning one of these companies,” Jensen says, “is going to give you fund-like exposure.”
The Long-Term Care ETF ( OLD) specializes in long-term care, but its higher expense ratio at about 0.5 percent may mean you’re better off with another option, she says. With a relatively small assets under management of about $9.9 million, some investment managers may undervalue the fund but Jensen says it may just be “a little bit ahead of its time.”
Jensen says while it may be tempting to bet on things like senior-focused insurance or biotechnology, those sectors will be more sensitive to policy changes and a little more risky.
“There’s a lot of uncertainty surrounding health care in the short term,” she says. “No matter what, we may still see benefits from facilities providing care.”
Consider housing development opportunities, if an accredited investor. Accredited investors as defined by the Securities and Exchange Commission must meet net worth and income requirements to participate in certain private equity opportunities so that in theory, they are financially secure enough to lose a little. Opportunities in private senior housing developments are available to accredited investors at high rates of return but are also “highly illiquid,” Jensen says.
Part of what led Northstar Commercial Partners to build senior-care facilities around the U.S. — primarily in college towns — was the 6 million individuals estimated to need senior housing in the next 20 years. Working in partnership with the Balfour group to manage the facilities, it is offering investors a 25 percent annualized internal rate of return with a five year or less hold period on a 151-unit facility in Ann Arbor, Michigan, a company spokesman says.
[See: The 10 Best REIT ETFs on the Market.]
Investment firm Mainstreet Group has developed rapid recovery centers that specialize in short-stay care immediately following hospitalization. The RRC fund is targeting a 7 percent annual current return and a 22 percent internal rate of return within seven years.
Jensen recommends that if you can, and would like to participate in such opportunities — many of which require minimum investments of tens of thousands of dollars — that you understand how to get your cash out, and under what circumstances.
“Suitability should be reviewed,” she says. “Read the fine print and … what needs to happen for you to get paid.”
Look to technology companies that are transforming senior care. Accredited and experienced investors also have the chance to invest in tech firms that are shaking up how seniors age in place and manage their health care, says Harry Nelson, chair of Adaptive Health Capital.
The Los Angeles-based company manages a venture equity fund for health care entrepreneurs, while also managing a private lending fund focused on senior-care facilities.
“The single biggest challenge or opportunity is how are we going to meet the needs of this boom?” Nelson says. “Our housing system and health care system are having to adapt to a profoundly different population.”
And technology is going to play a major role in that. Nelson’s firm allows investors with a $250,000 contribution to get on companies like LifeAssist Technologies, which enhances communication between caregivers, patients and family members.
Entrepreneurs see an opportunity, too.
Seth Sternberg and Sandy Jen started a tech-backed home care company for seniors called Honor. Honor recently found that despite seniors accounting for $1 trillion of the $18 trillion economy, only 0.7 percent of venture capital went into the senior market in 2014. Since then, Honor has raised $65 million for its platform that aims to streamline the way senior care is administered.
[See: 11 Health Care ETFs for a Heart-Healthy Portfolio.]
“The products out there [from the past] are pretty primitive in what they can do,” Nelson says.
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