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Has an Aging Population Impacted Corporate Shareholding?

Posted By Charlotte Aguilar-Millan, Monday, August 5, 2019

Charlotte Aguilar-Millan inspects the impact of aging on corporate shareholding in her blog post for our Emerging Fellows program. The views expressed are those of the author and not necessarily those of the APF or its other members.

 

Corporate shareholding is affected by what ideologies generational cohorts have. In the current year, 2019, we see Baby Boomers, those born between 1946-1964, at their peak corporate shareholding. This is because they are now at, or near, retirement age. Once retirement age hits, corporate shareholding starts to unwind as individuals cash in shareholding for retirement income. This is likely to peak for Boomers in the early 2030s. With this peak enters a new phase of corporate shareholding by Generation X, those born in 1965-1976, but more prevalently by Millennials, those born in 1977-1995. However, with this new phase of investing comes a different ethos. 

 

The term “ESG” - environmental, social and governance - was first coined in 2005 as a result of growing expectations that Corporates need more transparency and a documented moral compass. These new requirements ensured that Corporates had to demonstrate transparency including how they are responding to climate change as well as how they treat their workers. From 2005, this has grown to represent roughly 25% of all investing activities. Corporates have incorporated ESG into their operating model. An example of this can be seen from Tomás Carruthers, former CEO of Interactive Investor, who launched “Project Heather” in 2018. His aim is to build the first regulated investment exchange to be focused on businesses that are making measurable positive social and environmental impact.

 

The rise of ESG investing has not meant that the format of investing has remained consistent. Public trust between generations is in decline. Where Boomers were happy to select individual stocks from a stock exchange, Millennials do not invest in this manner. With the average age of homeownership increasing, in the UK it is currently around 32 years old, the point at which a Millennial can start investing in stocks and shares has shortened by a decade to their previous generation. As a result, Millennials seek to locate trustworthy investments given they have a shorter period than previous generations to save for retirement.

 

The growth in private equity is providing Millennials with this platform. Private equity backed companies in America grew by 300% between 2000-2018 while individual stocks declined by 43%. Millennials see that with private equity, an opportunity is given to smaller companies for growth without the time and expense drain of becoming listed. This in turn can stimulate the economy with innovative ideas that might not be realised without funding. Millennials have also seen the rise of the “unicorn” within private equity where a company is valued at over $1billion making it an enticing return opportunity. 

 

For markets to expect Millennial’s investing strategies to be the same as that of the Boomer’s is complacent. Millennials have grown up with a higher scepticism and lower trust environment than their previous counterparts. They are not expecting a golden retirement. Instead, they look to impact investing to create an ethical environment. With an aging population brings forth a new phase in those accumulating and investing wealth. This in turn will have a significant impact on corporate shareholding.  

 

© Charlotte Aguilar-Millan 2019

Tags:  aging  economics  shareholding 

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What is Peak Boomer and when will it hit?

Posted By Administration, Thursday, February 15, 2018
Updated: Sunday, February 24, 2019

Laura Dinneen is one of our Emerging Fellows. She and our other Emerging Fellows will be posting throughout the year. Her first article discusses the Baby Boomer generation in the context of an aging society.

It’s the summer of 1946 and the Second World War has been over for a little more than nine months. American GIs have returned victorious to the United States, which is experiencing great economic growth and an ever-increasing sense of optimism amongst the many newlyweds and first home buyers living the American Dream. Fighting against the sounds of Frank Sinatra, Perry Como and Eddy Howard on the airwaves, are the wails of new-born babies screaming throughout the nation. These were the first sounds of the earliest Baby Boomers, rippling across the globe from the United States to the UK, Australia, France, the Nordics, Hungary, Ireland; and then later Canada, Japan, and Germany.

More babies were born in 1946 than in any year in United States’ records – 3.4 million, 20% more than the 2.9 million babies born just one year before. 1947 saw more births still, at 3.8 million and a birth rate of 26.6 live births per 1,000 population. This was the beginning of what’s commonly known as the Baby Boom and a generational cohort of those born after the Second World War between 1946 and 1964 – the Baby Boomers. Much has been written about the Boomers, including a wealth of research and opinion attempting to assign particular character traits and a cultural identity to the cohort. It is clear is that this generation is significant in its influence, and marked by a strong shared experience. If they weren’t involved in changing the world through the Cold War, Civil Rights Movement, Beatlemaina, fall of the Berlin Wall, and putting humans on the moon, they witnessed it changing together.

Fast forward to today where many Boomers are hitting retirement age, with the youngest aged 54 and the oldest 72 years old, and what we have is a global ageing society. Demographers have graphically described the Baby Boom generation as the pig in the python: the bulge in the population pyramids of many developed countries. That bulge is passing through the metaphorical python into retirement years and causing age distribution changes that have never been seen before. This change in age distribution is what demographers call the ageing society; a global rise in the percentage of people classified as ‘aged’ as a share of the total population.

If we keep it simple and define the ‘aged’ population as those aged 65 and over, we can start understanding how Boomers are impacting today’s ageing society. The percentage of over 65s is rising globally, from a fairly stable base of just 5% in the fifties and sixties through to 8.3% in 2015 and a projected 17% by 2055. Those are global figures. The state of the ageing population is far more drastic in key Boomer countries like the UK, Canada, USA, France, and Italy where over 65s made up 22.4% of the population in 2015 and are projected to swell to 34.1% by 2055.

The rate of this age distribution change has been rapidly increasing since 2010 when the oldest Boomers started hitting the age of 65. As Boomers continue to flood the over 65 age group, they are accelerating the rate at which the population is ageing. As the youngest Boomers enter this age group in 2029, grow older and eventually as the entire cohort begins to literally die out, this acceleration of our ageing society will begin to diminish. This is Peak Boomer.

Based on the United Nations Department of Economic and Social Affairs, Population Division’s projections, we will hit Peak Boomer in 2035, at which point the rapid growth of the aged population slows down. If this estimate is on point, it brings significant consequences for how we react and adapt to the ageing population. Is it possible for an aged society to be able to thrive, or even survive?



© Laura Dinneen, 2018

Tags:  aging  economics  society 

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