Forget About the Heartland – Agriculture Investing Is Hot in Asia

Thanks to historically high barriers of entry, such as low liquidity, institutional investors only own roughly 3% of the agricultural farmland market, according to Bloomberg estimates. And as U.S. investments, such as farmland, fetch ever-escalating prices, investors are looking toward other markets to put their money to work.

 (Photo: PlanetObserver)

Many are eyeing Asia, a continent with rapidly changing consumer tastes, nutritional cognizance and discretionary spending as the place to be. Asia’s been touted not only for its non-traditional ag investment opportunities – but the region’s huge number of consumers impacts many non-Asian ag investments.

Take, for example, Deutsche Bank’s pitch to investors for Fonterra Cooperative, a New Zealand dairy. Investment analysts say Asia’s growing taste for dairy could provide an upside for investors. The demand also creates an optimal M&A climate, according to this WSJ story.

Last month, Victor Lean, managing partner of Singapore-based Caudex Asia shared his thoughts on Asia-focused private equity opportunities at AgReturn Global Investments, an investing conference in Chicago.

While investments in other emerging markets, such as Latin America, tend to focus on the perennial favorite – farmland – he focused on opportunities in extricating value in other links of the Asia supply chain, including fertilizer, post-harvest technology and processing. Whether it is dairy or farmland, Ag is clearly a place to extract profits in the near and long term.  Our next Ag Return event will be in June of 2013 stay tuned for updates and information on this sector of the market.

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Investors Seeking Aggressive Hedge Fund Managers With Exotic Strategies

Structured credit strategies continue to beckon investors all over the globe according to a recent research report from Deutsche Bank.  Investors, it seems, like the return streams these folks are providing. According to London-based research outfit Hedge Fund Intelligence, funds employing credit strategies recorded a median return of 7.54 percent, more than double the return for all funds combined that are tracked by the company.

With investors earning a pittance on yields in the Treasury market, it’s no wonder they are seeking out savvy fund managers who are getting aggressive with more exotic credit strategies.  

The Deutsche Bank report, click here to read, recounts a recent visit to several Midwestern fund managers who discussed their best ideas.  More than a few mentioned structured credit instruments.

One manager recently told Reuters, ‘If you're willing to go out more into more illiquid, structured or complex trades, there's more opportunity, and potentially mid-teen returns’. Read the story here.

Photo: s_falkow

So how far are these managers going out on the risk scale? 

Many are betting on collateralized loan obligations (CLOs), bank loans, and even some mortgage-backed securities that have been out of favor since the financial crisis hit.

Some say, that this time it’s different – both Deutsche Bank and Reuters point out that, unlike before the financial crisis, funds for the most part are not boosting returns with borrowed money.

The jury is still out. Stay tuned.

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