Insights Article | October 10, 2023
Just a Good Investment: Investing in Our Aging Population
The movement to do good has spread like wildfire across the investor community, fueled by the desire to support companies that align with values, not just profits. And as the markets work to rebound after a challenging few years, we’ve seen a shift in how sophisticated investors are re-building their portfolio strategies, from increasing investments in private credit to prioritizing purpose investing. The need to diversify and prioritize capital infusions into health and wellness—particularly our aging population—is evident.
Investing with Purpose
A recent survey by UBS found that 90% of wealthy investors want their investments to align with their values. And of the 3,800 polled, 79% of investors attributed the pandemic as having prompted a reassessment of their investment goals and renewed their focus to employ capital to drive change.
Popular terminology, such as ESG, sustainable, impact, and socially responsible investing, has evolved over the last couple decades to define investment in businesses that are committed to acting responsibly and doing good. While the subtle differences are gradually making their way into the mainstream, what’s certain is that a growing number of investors are now beginning to think more about the “why” behind their investment choices.
In fact, the Forum for Sustainable and Responsible Investment reports that “sustainable investing assets account for $17.1 trillion—or 1 in 3 dollars—of the total U.S. assets under professional management,” up from $639 billion in 1995 for a compound annual growth rate of 14 percent, with the most growth seen since 2012.
Full disclosure: Before we dive into the details of the benefits of investing in our aging population, Wilshire Finance Partners is not a mission-driven company and did not create its funds to solve a social issue or track its impact on investments. Rather, Wilshire has set its lens on providing capital solutions to support the growing demand for seniors housing and healthcare real estate in a rapidly increasing aging population.
With this compass in mind, we embed responsible and diligent best practices into our investment process to help experienced owners and operators of small to mid-sized seniors housing and healthcare facilities gain access to financing that may fall outside the parameters of banks or other lenders. We also address the need in the marketplace to finance properties that are accessible to low-income seniors in communities most impacted by health inequalities. And above all, we strive to partner with owners and operators who take pride of ownership and seek greater quality of senior resident care, knowing that these are the most rewarding partnerships for success.
Positioning Seniors Housing in a Healthcare Real Estate Portfolio
For investors with a strong interest in social investments, seniors housing real estate offers investors a pair of braided positives: 1) investment in a greater purpose with deeper values that offers elder adults access to better care, added health and wellness amenities, and the ability to age with dignity, and 2) a resilient asset class with favorable demographic patterns that shows long-term financial opportunity without having to own and manage property.
By 2030, the U.S. Census Bureau projects that all baby boomers will be 65 and older. This means that 1 in every 5 residents will be in retirement age, marking a demographic turning point when older adults are expected to outnumber children for the first time in U.S. history. Not only will seniors housing be in high demand, but this demographic change could also suggest a shift in who will operate facilities and how they will meet the demand, opening the doors for additional financing activities.
Socially responsible investors are now met with a timely opportunity to fund a needs-based sector motivated by their moral commitments, while also receiving significant portfolio benefits amid uncertain public markets, including an attractive return through the highs and lows of the economy, diversification, and exposure to long-term growth trends.
Even through the impacts of the pandemic, the seniors housing and healthcare sectors demonstrated resiliency and agility through changing market conditions and economic trends, plotting a strong trajectory for investment portfolios. And when paired with an approach designed to deliver stable income and principal protection, investing in seniors housing can be both a portfolio risk mitigatory and a purpose-driven opportunity identifier.
Seniors housing and healthcare real estate is hot property right now and has become more accessible to individual investors through private funds and public REITs, where historically institutional investors have made up the majority of the seniors housing market.
Public or private, each investment vehicle behaves differently. Consider investments that help meet your specific needs, objectives, investment horizon and risk tolerance level within a balanced portfolio.
How Wilshire’s WFP Income Fund Fits in Your Portfolio
The WFP Income Fund is a short-term fixed income investment that seeks to provide stable income and principal protection to its investors primarily through the Income Fund’s investments in first trust deeds and mortgages secured by seniors housing, healthcare, multifamily, and commercial real estate.
What is unique about the WFP Income Fund? Its blend of risk mitigation strategies has allowed the fund to generate a stable net asset value (NAV) and a 9.01% net annualized compounded return since inception in 2013.* The Income Fund also brings:
- Lower loan-to-value (LTV) ratios on the loans in its portfolio that provide a protective equity cushion to buffer against loss in the event of property value fluctuations or borrower default.
- Shorter-term loan duration—typically under 3 years—allows the Fund to react to real estate values and interest rates more quickly.
- Non-correlated to the stock and bond markets and little-to-no interest rate sensitivity
- Diversification across a number of segments, including geography, property types, borrowers, sponsors, maturities, rates, terms, and other mitigating factors.
Investors are responding to uncertain market conditions and pursuing purpose-driven investing by increasing investments in private credit, optimizing portfolios to emphasize more sustainable income, and committing to better investments. The increased demand for seniors housing and healthcare real estate is creating an opportunity for investors who want a well-positioned strategy to blend both higher yields with lower risk and invest in a better quality of life for our senior citizens.
*Returns as of September 30, 2023. Past performance is not indicative of future results.