* Age-related funds say they're outperforming indexes
* Investing in health, leisure, savings stocks
* Critics say thematic funds restrict investor choice
By Christian Plumb and Sinead Cruise
PARIS/LONDON, June 26 Their birth heralded the
longest phase of economic growth in living memory. Now, 65 years
on, wealthy "Baby Boomers" are doing the feeble global economy
another good turn, according to some fund managers.
Millions of newly-retired Europeans, North Americans and
Japanese are breaking open bulging pension pots, spelling big
profits for investors who can spot the companies best placed to
cater to their spending habits.
A small but fast-growing class of mutual funds is buying
shares in firms with most to gain from ageing populations, from
drugmaker Roche and Norwegian Cruise Line to
funeral operator Service Corporation International.
While the subject may not be racy, the returns can be, with
two of Europe's biggest such funds, Lombard Odier's Golden Age
fund and CPR Asset Management's Silver Age fund, achieving
respective returns about double and four times the equivalent 13
percent of the Eurostoxx index since their 2009 launch.
"The over-65s tend to have much higher disposable income and
part of the reason for that is because they had money invested
in the stock market during the 1980s and 1990s when shares were
doing exceptionally well," said Johan Utterman, portfolio
manager of the Lombard Odier Golden Age Fund.
Golden Age returned 34 percent from its inception in
November 2009 through the end of May while Silver Age had gained
nearly 50 percent since it kicked off activities a month later.
Both have, however, lost ground in the equity markets rout in
recent weeks - roughly 5 percent and 6 percent respectively.
Similar funds in Europe include Schroder International
Selection Fund Global Demographic Opportunities and, in Asia,
the somewhat more broadly themed Chang Xin Jinli Equity Fund,
which has some $900 million under management.
CPR, while investing only in European equities, says the old
age theme is broad enough to allow a diverse portfolio. The fund
has considered buying some Japanese stocks - given that Japan is
the country whose population has the highest proportion of old
people - though it has shied away from doing so thus far.
"Other funds have attempted this, but they typically had too
narrow a way of looking at ageing," said Vafa Ahmadi, head of
thematic and sector allocation funds at CPR Asset Management.
"They didn't consider ageing except through health care in the
larger sense, whether drugs or retirement homes."
Widening the net to the early retirement years allowed the
fund to make leisure and savings stocks key portfolio themes
along with pharmaceuticals, healthcare equipment and wellbeing -
which includes cosmetics companies such as France's L'Oreal
and Germany's Beiersdorf.
Beiersdorf, the maker of Nivea face and body lotions,
"understood as well as L'Oreal and perhaps better that they
needed to provide something that was less top of the range in
terms of price and which was focused on men," Ahmadi said.
"This is what we like, when (the ageing trend) impacts the
business model - you find real deposits of growth," he said.
FADS AND PHENOMENA
Demographically-focused investments are a key test of demand
for thematic funds, many of which have struggled to attract U.S.
investors since the bursting of the dotcom bubble crushed
various Internet-themed funds.
But while the dotcom boom was a product of a particular
period in time, the ageing process and the specific consumption
patterns it promotes, are here to stay, fund managers argue.
"The UN has published several statistics that demonstrate
how powerful the theme is," said Utterman, adding the population
of people 65 or older was expected to rise at triple the pace of
those aged 20 to 64.
The increasing popularity of ageing-related funds in Asia
and Europe - albeit from a small base - also demonstrate the
lure of a good narrative in selling funds, experts say.
This is especially true in an era when actively managed
funds based on specific economic trends face growing competition
from low-cost index tracker funds.
Assets under management at CPR's Silver Age have jumped to
152 million euros ($199 million) from 93 million at the end of
2012, while Golden Age runs around $300 million.
Sceptics, however, say limiting funds to a theme leaves
managers' hands tied if, for example, pharma stocks fall out of
favour or oil drillers and utilities - which have no age bias -
"While the economic or social shift might be very important
and be reflected in stock prices and asset values, one can box
oneself in by creating a fund dedicated to such a theme," said
Nicholas Lyster, CEO of Principal Global Investors (Europe), a
subsidiary of Principal Financial Group.
"There is a danger that one is slave to the theme and buys a
stock at any price," said Lyster.
Popular wisdom counts death, and thus the ageing process, as
one of the few certainties in life, but there are no guarantees
that future retirees will enjoy the same kind of spending power
flexed by the "Baby Boomers".
Savings rates have dwindled as living costs have increased,
and the financial investments that make up the lion's share of a
retirement savings pot have been badly hurt by years of
financial crisis and global recession, experts say.
Data from the Washington D.C-based Investment Company
Institute suggests U.S. retirees were broadly better off than
younger members of the population in 2011, with 22 percent of
citizens aged 18 or younger living in poverty compared with just
9 percent for those aged 65 or older.
But unless economic portents improve quickly, the
opportunity to cash in on wealthy retirees may come and go
within a generation, rendering some of these targeted business