The fund will hold equities, land through Reits and other quoted investments and commodities through exchange traded funds and exchange traded commodities. Fund manager Henry Boucher will blend these asset classes to produce the best risk-adjusted returns.
Sarasin has seen strong performance coming through on the agriculture theme within its global equity portfolios and launched AgriSar on the belief that investors would benefit from exposure to this through a specialist fund. It believes the best way to play agriculture is building a portfolio that will benefit from all stages of agricultural production, from land, fertiliser, pest control, irrigation, production technologies, storage, processing, distribution and consumer. According to Sarasin, this is a better approach than speculating on commodity prices or buying illiquid land.
The new fund will also use derivative-based portfolio insurance strategies to protect the fund value in volatile conditions, as permitted by the Ucits III directive. Sarasin used these strategies for institutional portfolios before Ucits III and made them available for retail investors with the launch of its III funds in 2006.
Agriculture is expected to benefit from increased demand for food as the world population expands – in particular, the increasing consumption of meat and dairy products in developing countries. The production of biofuels is also putting a strain on resources, so that soft commodity prices have been pushed up as there is not enough land for all uses.
There are a limited number of agricultural funds for retail investors, such as Eclectica agricultural and RCM global agricultural trends, that may compete with Sarasin. However, Sarasin’s use of different asset classes and derivatives to control volatility brings something different to the market that may appeal to investors looking for a broad and flexible approach to the agricultural sector.