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Money managers under the microscope

Agriculture funds make hay…

September 8, 2010

There’s potash in them thar hills… and maybe sometime soon we’ll be wondering aloud whether potassium carbonate (thanks: Wikipedia) can push on to $2,000 per ounce. In the meantime, the buzz around fertiliser stocks has driven agriculture funds to some eye-catching outperformance.

We’ve taken a look at performance in August among equity funds available to buy in Britain. Stuart Winchester’s Thai equities fund is putting others in the shade, and a few gold funds are dotted about near the top of the rankings, but we liked the story behind the agri funds’ outperformance, riding on the back of a wave of M&A activity. You can read the story here.

There are some people here who dismiss the rationale behind the love for fertiliser stocks and the grander macro themes of wealthier emerging market populations requiring more food and meat, but Bryan Agbabian at Allianz RCM’s Agricultural Trends fund is a long term believer.

“BHP’s move echoes our longer-term fertilizer thesis as well as our belief that softening in grain prices is largely behind us,” he tells us via email. “More specifically, BHP’s offer recognizes the growing need for yield-enhancing agricultural inputs, particularly in Emerging Markets where Potash has significant exposure; Potash mines are considered to have the best potash ore with the lowest production costs. Continued population growth, urbanization, and income growth will continue to drive robust demand growth and the need to maximize the productive capacity of the world’s limited supply of arable land.”

In short, the agri funds reckon this is just the start of their grand ascent.

“While shorter-term opportunities exist, we believe agriculture funds should be viewed as long term opportunities deserving of stable allocations,” Agbabian continues.  ”Long-term, we believe global population growth and rising incomes, particularly in emerging markets (EM), has led to changes in how much, what, and how the world eats.”

“These factors are straining the world’s finite supply of arable land, setting the stage for a long-term supply/demand imbalance. We seek investment opportunities along the entire food supply chain, from companies that offer solutions to increase output per acre, to companies that process and distribute food to end consumers.”

The top 7 agriculture funds were up 5.1 pct on average last  month, compared with an average loss of just over 2 pct for the 3,300 equity funds on sale in the UK, according to data from Lipper. Over 12 months, they are up 20.9 pct, against an average 8.6 pct gain for all equity funds.

Comments

To the blogger, can we know what is the top 7 agriculture funds

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