Death Becomes The Hedge Fund Industry

Jul 24 2008 | 7:52am ET

Hedge funds have a ghoulish new strategy to profit from the rising death rate among Baby Boomers. A pair of high-profile hedge funds have taken big stakes in funeral-home and cemetery companies, which are expected to soar in value as the giant generation enters its declining years; the oldest of the 78 million American Baby Boomers is now 62.

SAC Capital Advisors recently added about 2 millions shares to its stake in Service Corp. International, the biggest funeral-home and cemetery company in the U.S., Bloomberg News reports. SAC owns 2.2% of Service Corp., and also 6.1% of its biggest rival, Stewart Enterprises. Quantitative hedge fund shop AQS Capital Management is also expanding its stake in Houston-based Service Corp.

The U.S. mortality rate, which was 8.1 per thousand two years ago, is expected to soar to 9.3 per thousand in 2020 and 10.9 per thousand in 2040, the National Funeral Directors Association says. Service Corp. expects that dying Boomers may begin to impact its business in as little as five years. Analysts expect Service Corp. shares will rise more than 50% in the next 12 months.

Service Corp. this week made a $1 billion offer to buy Stewart.


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