Aim: Growth by investing globally in companies that contribute to or benefit from the agriculture sector
Minimum investment: Lump sum £1,000
Investment split: 100% globally in companies that contribute to or benefit from the agriculture sector
Place of registration: Luxemburg
Charges: Initial up to 5%, annual 1.6%
Commission: Subject to negotiation
The Pictet Funds PF (Lux) agriculture fund invests in companies that contribute to or benefit from the agriculture sector.
Hargreaves Lansdown senior analyst Meera Patel says: “When you look at most commodity funds, the vast majority tend to be focused on hard commodities such as metal, oil and coal. They don’t tend to invest in soft commodities, which are grown rather than mined. This is why an agriculture fund can have a place in a portfolio, not just for diversification purposes, but also the benefit from the long term growth prospects in this sector.”
She says that Pictet is well known for its thematic and environmental funds in the UK and are feels that it is well placed to manage a fund like this.
“The fund is set to play the agricultural theme through investing in the shares of farm machinery, fertilizer and infrastructure companies, for example. Increases in soft commodity prices should benefit the fund and there is greater diversity in that the fund looks to capture the growth opportunities across the breadth of the agricultural sector.”
In Patel’s view, the case for investing in agriculture is compelling. “With demand for crops likely to double over the next 40 years, this should underpin higher agricultural prices. The consumption of basic foods will grow irrespective of incomes, as we all need to eat to survive and as the population grows there will be an increasing demand for crops.” She adds that as the middle class population explodes, particularly in China and India, diets are changing in favour of meat which is also putting increasing pressure on the demand for livestock.
“Additionally, with less land to grow food, which can result in higher values of farmland, and an increasing need for capital investment in the sector, the fundamentals look firmly in place for the agricultural sector to grow over the coming decades,” says Patel.
She adds that Hargreaves Lansdown believes investing in agriculture is a long-term growth area and it is already a supporter of this theme. “A fund like this can also dovetail well with other resources funds that are focused on hard commodities as there should be a low correlation in the underlying holdings,” she says.
Considering the less appealing aspects of the fund Patel says: “There is little I don’t like about the product. There are several funds in this space now so competition is growing and it would be good to see a track record built over time to compare all of the funds. “
She says that investing in just one sector or theme makes the fund higher risk and volatile over shorter periods. “With this in mind, investors could consider regular savings into a fund like this. It is a specialist area and can have exposure to emerging markets so investors need to take care when investing to ensure they do not put all their eggs in this one basket.”
Patel expects competition to come from several funds in this investment area, including Eclectica agriculture, Sarasin AgriSar, Barings global agriculture, Allianz RCM global agricultural trends and Castlestone aliquot agriculture.
Suitability to market: Good
Investment strategy: Good
Adviser remuneration: Average