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Barclays Capital goes back to the land with aggie deal

Barclays Capital is offering an agriculture commodities structured product targeted at fund of fund managers and investors seeking an extra layer of diversification.

The GBP GSCI agriculture note is being marketed as a tool for multi-managers to diver- sify away from core commodities such as energy and precious metals by gaining exposure to wheat, corn, sugar, cotton, coffee and cocoa.

It will return 120 per cent of the rise in the GCSI Agriculture Excess Return index at the end of a five-year term. It also offers full capital protection unless the index falls by 40 per cent or more and fails to recover to the starting level by the end of the term. If this happens, capital will be reduced by the amount that the index has fallen.

The index has been in steady decline since the 1970s, with agriculture prices at a 35-year low, but Barclays Capital points to several factors that could reverse this trend. It says growing urbanisation and concurrent rises in income in China will lead to a greater demand for meat. The knock-on effect will mean more need for commodities such as corn to feed animals. Other drivers include climate change, which could lead to a wheat shortage that would push up prices.

Barclays head of asset management (UK investor solutions) Alex Robinson says: “It is difficult for fund of fund managers to again access to agriculture commodities. They can inv-est in individual stocks or poss- ibility the futures market but our note makes it is easier.”

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