Schneider: We are focusing mainly on age-related dynamics. The question is, what impact will changing population trends have on economies and certain industries? These age-related trends – basically an aging population in western Europe, the US, and Japan, and very young populations in many Asian countries, South America, and some African countries – may have a significant impact on economic growth. We want to take advantage of long-term growth themes and avoid the losers of demographic change.

Schneider: We concentrate on countries with high GDP growth rates, but there are certainly ways to benefit from aging societies. First of all, there will be a need for new consumer products, and aging societies are usually quite affluent. Health care is definitely an issue. There is a structural rise in certain age-related illnesses, like glaucoma. If you do not treat this, you go blind. What we are working against, unfortunately, is that this will put the health care systems under stress, because the demand for payment will rise.

A very important issue in aging societies will also be savings for retirement. If more people retire and less work, Germany’s pay-as-you-go financing system will not be sustainable. The people who retire in 30 years can’t expect to get what retirees get today. So there will be a desperate need to save for retirement in order to maintain a certain lifestyle.

Schneider: Certainly you have risks in that market: you have different accounting standards, different legal rules. But these markets will develop over time. I think our perception of these countries has to change. In particular, the superior growth rates of these countries are important. Ignore economic cycles for a moment. There will always be economic cycles with higher growth and lower growth. The sustainable growth in these areas will, given the demographics, be higher, and the way to benefit from that is to invest longer term in these countries.

Schneider: It won’t even take that long. The problems in China will start throughout the next decade. The one-child policy has been in place since the 1970s, and these kids are now getting into their 30s and having kids on their own, but again, just one kid. So the population will decline quite quickly, actually. Still, for the next six to eight years, China will be okay. Until 2012 or 2014, the workforce population will still be growing.

But even beyond this date, China may do quite well, because there you have two factors working against each other. You have an aging population, but you still have a huge rural population which is not yet tied into the global economy. So China might be able to avoid demographic pressures a bit longer as it tries to integrate these people into its workforce in urban, metropolitan areas.

Schneider: One thing that will be really important for rising societies like China will be investment in infrastructure. These countries need to bring their populations into the world economy to stay competitive over the next 20 to 30 years. These people want to have adequate shelter, fresh water, wastewater facilities, road and rail transportation, telephones, food, etc. India will move in the same direction, as will Indonesia, Brazil, and Turkey. There is still a lot of work to do.


Christian Schneider manages the Allianz-dit DemographicTrends fund (SIN A0LGX7, ISIN LU 0281689694), launched through AllianzGI Luxembourg in February 2007 and on public sale in Germany since April, 20, 2007. The fund currently holds 55 million euros in assets under management

This interview was first published on the Allianz Knowledge Site.

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