Beating back obesity

As global incomes rise, so does the prevalence of obesity—and the need for solutions

01 Aug 2018

Key takeaways

  • As more economies industrialize and per capita GDP rises, so does calorie consumption.
  • More than 600 million people are estimated to be obese, defined as a body mass index (BMI) of 30 or over. That’s nearly one in 10 people in the world.
  • UBS Wealth Management has targeted obesity as one of its longer-term investment themes (PDF, 744 KB). By allocating capital to companies that deliver prevention and treatment solutions, investors can potentially earn an attractive financial return while aligning their portfolios with companies that are helping address a societal issue.

“Are you diabetic?”

Don’t be surprised if this is the first question you’re asked when you check into a hospital. As more economies industrialize and per capita GDP rises, so does calorie consumption. Packing on the pounds is no longer a rich world problem, and neither are its companion diseases. Heart problems, kidney failure and adult-onset diabetes are just some of the health issues associated with overweight and obesity.

UBS Wealth Management has targeted obesity as one of its longer-term investment themes (PDF, 744 KB). These are deep pockets of growth driven by structural trends that will play out regardless of the business cycle. By allocating capital to companies that deliver prevention and treatment solutions, investors can potentially earn an attractive financial return while aligning their portfolios with companies that are helping address a societal issue.

“The trend in rising obesity is less known in emerging countries,” says Laura Kane, Head of Investment Themes America. “With urbanization people’s income rises. And they’re more exposed to Western-style food in cities than on the farm. So they’re consuming more packaged goods and fast food. These meals are often loaded with fat, meat and sugar. They’re dense with calories but poor in nutrients.” And they’re often readily available in cities, she adds. “Affordability and convenience—those are powerful purchase incentives.”

One in 10

The numbers on the global obesity epidemic are alarming. Using gathered and extrapolated data on obesity trends in 195 countries (essentially, the entire world)—from 1980 to 2015—researchers at the Institute for Health Metrics and Evaluation (IHME) at the University of Washington discovered that rates of obesity in 73 countries at least doubled over the study period and continuously increased in other countries.1 More than 600 million people are estimated to be obese, defined as a body mass index (BMI) of 30 or over. That’s nearly one in 10 people in the world.

Furthermore, no country among the nearly 200 studied had reduced overweight or obesity levels over the study period. “This is astounding given the huge health and economic costs linked with overweight and obesity,” the researchers note.

Andrew Lee, Head of Sustainable and Impact Investing for UBS Wealth Management, points out that in developed countries, people have less incentive to change their behavior because they can often access a cure. Those economies with the resources to develop remedies may also export them to emerging markets. Populations enjoying increased prosperity are beginning to afford treatments available in the developed world for obesity-related illnesses.

“We see opportunities in consumer and healthcare companies that develop prevention or treatment solutions as part of a broad portfolio of products and services marketed in North America and overseas,” Lee says.

“We especially look to names whose business model includes the monitoring and treatment of diabetes and dialysis services. There are other common consequences of obesity, including hypertension, non-alcoholic fatty liver disease, respiratory problems, cancer and musculoskeletal disorders, but there are fewer direct investment opportunities related to many of these.

“In our view, market opportunities related to the obesity theme should see growth in the mid- to high-single digits.”

An ounce of prevention

Although the IHME study didn’t attempt to explain the causes for rising obesity, Dr. Ashkan Afshin, who led the research team, pointed out a general decline in physical activity, considered a chief culprit in obesity, began before the global increase in obesity. He singled out instead the food environment.

Kane says, “The best ‘cure’ for obesity is to keep a problem from even occurring. We see investment opportunities in obesity prevention, like better-for-you foods to improve health.

“Like all themes in our long-term investment series, the obesity thematic idea gives investors a chance to allocate capital to companies that are providing solutions that address a societal issue,” she adds.

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Disclosures

Research from CIO Global Wealth Management is provided by UBS Financial Services Inc. UBS Financial Services Incorporated of Puerto Rico is a subsidiary of UBS Financial Services Inc. In Canada, research from CIO Global Wealth Management is provided by UBS Investment Management Canada Inc.

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