Market Overview

Impact Investing Beyond Venture Capital

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The senior longevity economy holds tremendous potential for investors looking to earn positive returns while helping our senior community. With the rise of Aging 2.0, venture capital opportunities in health technologies have been a popular choice for investors eager to help the elderly population—a population personal to all of us, regardless of gender, race, education, or economic status. Still, while Aging 2.0 is doing much to help innovate and create new products to enhance longevity, I’d say there is an even better way to invest to impact the lives of seniors right now: senior housing.

America’s elderly demographic will more than double to 72 million by 2030 compared to 2000 population figures. The growth rate is particularly acute for the 75+ population, which is forecasted to double its 2013 population level by 2018. What’s more, life expectancy has been increasing for over 100 years. The average lifespan of men and women today 10 years longer than it was in 1950, while today’s seniors have fewer children available to care for them. This “senior surge” gives us the opportunity to make a true need-based investment in a sector expected to grow through 2040.

Still, despite the tremendous opportunity to invest in senior housing, many are not aware of the opportunities available to invest in the market. Below I focus on two: private equity funds and healthcare REITs.

Senior Housing Private Equity Funds
Private equity funds like SeniorLivingFund.com pool investor money to invest in multiple projects. These could vary by size, location, or type. Fund managers choose the projects based on a range of demographic and market factors. Because of this, investors need very little knowledge of the senior housing industry to make a solid investment. Even better, they have offered consistent, strong returns. The sector continues to outperform other asset classes in commercial real estate, with returns of 16.1%, 17% and 15.3% over a 1-, 3- and five-year period (according to CBRE mid-year update 2016). Returns for multifamily were just 12%, 10.9% and 11.9% comparatively.

Healthcare REITs
Most public REITs, such as Sabra Healthcare REIT, Inc., invest in, or lend to, existing real estate properties and intend to operate them long term as a part of their own investment portfolio. Whereas private equity funds are not traded, public REITs can be traded on public exchanges, which allows you to get in and out of them quickly, much like other publicly traded investments (stocks, etc.). They offer a simple way to get involved in the sector at nearly any price-point. Many healthcare REITs include a mix of healthcare and senior housing investments—very few focus solely on senior housing.

Some of the positives of investing in private equity funds and REITs:

They’re diverse. Most private equity funds and REITs invest in many different communities (memory care, assisted living, skilled nursing) in different markets and cities throughout the United States. This helps lower the risk of investing directly in a single community. It also decreases the need to research and understand the market, because qualified Fund Managers handle that part on behalf of the investor.

They’re alternative investments. Just like venture capital, senior housing is an alternative investment. Because it holds somewhat greater risk, it also offers potentially higher returns than traditional investments (stocks, bonds, etc.). Alternative investments are increasingly popular in today’s market, which has had low yields. The Yale Endowment has indicated alternative investments have played a major role in making it one of the best-performing university endowments in the United States.

But perhaps most importantly, they make a difference. For instance, they help eliminate senior isolation, which has been shown to increase mortality rates in older adults. A Place for Mom indicates quality communities provide important social and physical activities, safety, nutrition, mental stimulation, transportation, and independence—proving the impact of your investment won’t just create buildings. It will build more purposeful, joyful lives.

Posted-In: contributorBroad U.S. Equity ETFs Health Care Futures Opinion Markets ETFs General

 

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