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BMO Global Asset Management

January 22, 2016 08:00 ET

BMO Global Asset Management Report Addresses Implications of Aging Workforces

Longer lifespans, paired with drop in birth rates, create drag on global productivity growth - emerging markets buck trend

CHICAGO, ILLINOIS--(Marketwired - Jan. 22, 2016) - BMO Global Asset Management (U.S.) today released a report on the implications of demographic changes around the world. The report states that the repercussions of these changes are considerable for advanced markets, which have to deal with:

  • Increasingly inadequate pension and social security systems;
  • Mounting strain on existing health care and retirement facilities; and
  • Uncertainty regarding government budgetary forecasts due to slowing GDP growth.

"We are always surprised that so little attention is paid to the rapidly changing demographic situation throughout the world," said Barry McInerney, Co-CEO, BMO Global Asset Management. "The long-term trends are clear. The birth rate is dropping everywhere, workforce growth is dramatically slowing, the median age is rising as people are living longer - and this is more pronounced in developed economies."

The report notes that, in many advanced economies where life expectancy was already relatively high, it has increased by nearly 10 years since 1970 alone. In developing economies the increase tends to be higher.

"While we should applaud the improvements in health care, diet and lifestyle that have permitted this trend to longevity, we need to recognize that, back in the 1970s, this was not anticipated and not embraced in forward planning," noted Mr. McInerney. "Governments and others have been playing a game of catch-up ever since."

The report describes the advent of a rapidly changing global population with steadily fewer workers and, in particular, fewer workers relative to the number of retirees. In turn, economic growth is likely to slow, and the remaining workforce members may struggle to maintain their overall living standards.

Notably, the report found that the working-age population is now starting to shrink in the developed world. This will deduct approximately 0.3 percentage points annualized from global GDP growth over the next 35 years, whereas, in the previous 35 years, it had added an average of 0.4 percentage points annualized to GDP growth. The combination of the two means a comparative negative growth differential of 0.7 percentage points annualized in the next several decades.

"From an asset management perspective, behavioural economics now becomes a very important study," said Mr. McInerney. "A global legion of retirees will need income and security, spend a significant amount on healthcare, tend to be downsizing housing rather than upsizing, and are likely to be patronizing different types of retailers than younger people. In turn, the investment opportunity may lie outside the developed world, in emerging and frontier markets."

The report concluded that the world will need the people of working age to be productively employed, given the vast number of retirees sitting back hoping that someone is out there generating the wealth to fund their pension or social security benefit. This could benefit countries that are still experiencing booming population growth, such as India and larger African nations.

To view the report, please visit: www.bmogamviewpoints.com

For more information on BMO Global Asset Management, visit: www.bmogam.com

About BMO Global Asset Management

BMO Global Asset Management is a global investment manager delivering service excellence from 27 offices in 17 countries to clients across five continents. Including discretionary and nondiscretionary assets, BMO Global Asset Management had more than US$237 billion in assets under management, as of October 31, 2015.

Our four major investment centres in Toronto, Chicago, London and Hong Kong are complemented by a network of world-class boutique managers strategically located across the globe: BMO Real Estate Partners, LGM Investments, Monegy, Inc., Pyrford International Ltd., and Taplin, Canida & Habacht, LLC. With operations throughout North America and Europe, and in Abu Dhabi, Beijing, Shanghai, Hong Kong, Melbourne and Sydney, BMO Global Asset Management has been recognized by Pension & Investments as one of the world's largest 100 asset managers based on combined assets under management as of December 31, 2014 and is a signatory of the United Nations-supported Principles for Responsible Investment initiative (UNPRI).

BMO Global Asset Management is a part of BMO Financial Group (NYSE: BMO), a fully diversified financial services organization with approximately C$642 billion in total assets as of October 31, 2015, and close to 47,000 employees.

Disclosures

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This is not intended to serve as a complete analysis of every material fact regarding any company, industry or security. The opinions expressed here reflect our judgment at this date and are subject to change. Information has been obtained from sources we consider to be reliable, but we cannot guarantee the accuracy. This presentation may contain forward-looking statements. "Forward-looking statements," can be identified by the use of forward-looking terminology such as "may", "should", "expect", "anticipate", "outlook", "project", "estimate", "intend", "continue" or "believe" or the negatives thereof, or variations thereon, or other comparable terminology. Investors are cautioned not to place undue reliance on such statements, as actual results could differ materially due to various risks and uncertainties. This publication is prepared for general information only. This material does not constitute investment advice and is not intended as an endorsement of any specific investment. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. Investors should seek advice regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Investment involves risk. Market conditions and trends will fluctuate. The value of an investment as well as income associated with investments may rise or fall. Accordingly, investors may receive back less than originally invested.

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