Morgan Stanley Execs Talk ‘Longevity,’ Demographics, Birth Rates and Senior Housing

Morgan Stanley’s top investment heads have initiated a committed focus on longevity and demographics, as more Americans are living longer and millions of baby boomers prepare to retire, creating new opportunities across commercial real estate and wealth management. 

Several of Morgan Stanley’s top executives held court Monday during the firm’s “Longevity Media Roundtable,” which included Lauren Hochfelder, co-CEO of Morgan Stanley Real Estate Investing; Betsy Graseck, global head of banks and diversified finance research in the firm’s institutional securities group; and Ellen Zentner, chief economic strategist and global head of thematic and macro Investing for Morgan Stanley Wealth Management. 

Anthea Tjuanakis Cox, head of financial planning wealth management at Morgan Stanley, moderated the discussion, and opened her remarks by noting that the 20th century was built around accumulation of capital, while the 21st century will be a story of the allocation of capital. 

“We’re entering an age where longevity isn’t just a demographic fact, it’s more of an economic force,’ she said. “For the first time in history, by some accounts, half of today’s 5-year-olds in developed economies are expected to live well past 100, and that shift has profound implications for labor markets, health care systems, and the ways we allocate assets.”

Graseck emphasized that as more Americans age and enter retirement, the investment community will need more products that enable inflation-adjusted returns that are sufficient to meet those lifestyle needs.   

“That means potentially more insurance products, potentially more optionality embedded within traditional equity or fixed-income asset classes, and more partnerships not only within asset managers, but between asset managers and insurance companies,” she said. 

Hochfelder spoke of the “knows and unknowns” of investing and asset management, pointing out that while one can always speculate on interest rates and tariff limits, the number of people 80 and older in our society and their amount of wealth can easily be calculated.  

“We like the theme of longevity and demographics because it’s tangible and knowable and really provides curable demand predictors in what we do,” she said. “In a time of so much uncertainty, we are quite certain people are getting older, and their real estate needs will change.” 

These real estate needs she spoke of include millennials requiring more space, Boomers demanding increased senior housing services, and an office market impacted by a decline in the working-age population.

“Real estate plays a very powerful inflation hedging role in investor portfolios, it has a greater yield component and durability, lower correlation with other asset classes,” said Hochfelder. “We look at it from the standpoint of where it affects asset values and cash flow potential from a real estate perspective, and how it impacts investors.” 

Zentner focused her remarks on life expectancy and birth rates, noting that global life expectancy was 32 years in 1900, which improved to 46 years by 1950 and 73 years by 2023. 

But she also harped on the fact that as we age, our societies must replace deaths with births, but the birth rates of the global population have been falling pretty consistently in recent decades, mostly in affluent economies, creating an economic imbalance. 

“Growth in the economy is driven by birth rates, which drive the replacement rates in the U.S., and participation rates in the labor market,” she said. “If you’re going to have falling participation rates under an aging population, then you need to offset with immigration and technological innovation — hence some of the intense focus we’ve had at Morgan Stanley AI. and humanoids, things that help us become more productive with a smaller labor force.”   

Hochfelder circled back to demographics when she discussed how commercial real estate “is the infrastructure that underpins our lives,” by noting that the first cohort of baby boomers turns 80 years old this year, and the number grow at a 5 percent compound rate in the years to come. 

She added that Morgan Stanley not only sees “a durable demand driving senior housing forward,” but because Boomers control half of this country’s wealth, the investment community needs to be ready to take advantage of how much home price appreciation has benefited from Boomers living in their homes for several decades, and the disproportionate share that Boomers have invested in public equities over the years.  

“Looking at this wealth effect, looking at numbers, you essentially have a lot of people with a lot of wealth, and that means a lot of demand for senior housing and a high ability to pay,” she said.

Brian Pascus can be reached at bpascus@commercialobserver.com