(James Saft is a Reuters columnist. The opinions expressed are his own.)
By James Saft
(Reuters) – Peak population is coming, sooner than you think, and bringing with it enormous investment challenges.
Birthrates are falling, and will continue to do so, especially in fast-urbanizing emerging markets, according to Sanjeev Sanyal, an economist and demographer who is also global strategist at Deutsche Bank.
“We feel that the world’s overall fertility rate will fall to replacement rate by 2025. Population will continue to rise for a couple of decades, in large part because of increasing lifespan, but this is a major global turning point, and one with profound investment implications,” Sanyal wrote in a note to clients released on Monday.
That would be about 50 years sooner than recent UN estimates, which expect peak population in about 2100.
While a falling and aging population would obviously present opportunities, and from many perspectives is a good thing, it is hard to overstate the challenges for investors in a world in which the number of people is actually shrinking. A 2010 Bank for International Settlements paper by economist Elod Takats estimated that demographics would, over 40 years, shave about 1 percent a year off of asset prices. That’s a huge bite out of returns.