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September 26, 2016 at 06:17 AM
“Buy land, they’re not making it anymore.”
Mark Twain’s advice isn’t lost on the growing number of institutional investors scouring the earth for new opportunities. According to a new study by Preqin, these investors “seek to diversify their portfolios and position themselves to take advantage of growing demand for food arising from global population growth and increased consumption by the emerging middle classes in developing countries.
They’re investing in farmland, agricultural business and AgTech (agricultural technology) as a way to gain exposure to these demographic changes.
The Prequin report, released in mid-September, found that:
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$22.2 billion was invested in agriculture/farmland- focused private equity funds between 2006 and 2015
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90% of investors in agriculture/farmland are open to landowner-focused opportunities
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67% of investors with a preference for ag/farmland funds are interested in investing in AgTech
Prequin, a data and intelligence company focusing on alternative investments, also found that assets in ag/farmland funds have been increasing steadily, from 18 unlisted funds with $1.6 billion in assets in 2013 to 17 funds with a record $4 billion raised in 2014. In 2015 10 funds raised $3.9 billion.
Granted, compared to other sectors such as the $2 trillion REITs market, these funds comprise a small arena, but there are fundamentals that boost the category’s attraction.
A Morningstar report noted that by 2050 the world’s population will grow to 9.7 billion from 7.4 billion, and mainly in emerging markets.
The report on the VanEck Vectors Agribusiness ETF (MOO) states, “Although weather can have an unpredictable impact on supply and prices of agricultural commodities in the short run, long-run demographic shifts are favorable for agricultural industry. Global population growth and increasing meat consumption in emerging markets are sustainable trends that should increase the demand for food during the next few decades.”
