Investment into global farm production has not only generated high returns for investors over the past year, but will be increasingly necessary in the fight to avert global food shortages.
Extreme weather has led to a fall in food production this year, leading to dramatic increases in food prices, and the UN has called for increased sustainable food production to avert a global crisis.
The GAIA Farming Index calculated by Indxis, an independent provider of bespoke indices, allows investors to support agricultural production through a long-term investment.
The index invests in listed companies that mainly operate farms producing meat, grains, edible oils, dairy, fish and other diversified farming methods. The main exposure is to large-scale, diversified agri-producers, primarily in emerging markets where large scale farming is prevalent.
The index returned 10.3 per cent over one year on a cumulative basis since launch. Over the past four years, it has returned 18.4 per cent based on back-tested data, outperforming such references as the MSCI Emerging Markets SMID (12.9 per cent), the Market Vectors Agribusiness ETF (9.6 per cent) and the Claymore Global Agriculture ETF (7.7 per cent) over the same period.
The index was launched in November 2011 by GAIA Capital Advisors, a Geneva-based fund manager and investment advisor specialising in global natural and agricultural investing, on the principle of sustainable food production to “feed the world”.
Alan Price, sales director of Indxis, says: “The index shows investment into farm production, a traditionally under-invested sector, can not only generate much needed income for investors but allow companies to increase farm productivity, which is increasingly vital as food production fails to keep pace with population growth.”
Coast Sullenger, investment manager at GAIA Capital in Geneva, adds: “Structurally low stock-to-use ratios are the clearest sign of the fundamental shortfall of food production. This situation will become even more critical unless the sector attracts investment to boost production and productivity.”