Baring Global Agriculture Fund celebrates first anniversary as Assets Under Management (AUM) reaches £139m

Fertiliser manufacturers to drive agriculture sector returns in 2010

As the Baring Global Agriculture Fund celebrates its first anniversary, fund manager Jonathan Blake explains why now is the time for investors to pay particular attention to the investment returns on offer in the Agriculture sector through global fertiliser manufacturers and food companies with strong brands.

The Baring Global Agriculture Fund launched on 15 January 2009. Since inception the fund has returned 43.7%, 32.6% over the last six months and has just over £139 million assets under management. The fund offers the opportunity to invest in a portfolio of companies that should benefit from both the growing and changing global demand for food. It encompasses a broad investment universe, from fertilisers and logistical infrastructure for delivery through distributors, processors and marketers to food manufacturers and food retailers.
The top three sector holdings are currently agrochemicals, food producers and diversified food manufacturers. On a country basis, the fund is globally invested with a current emphasis on Brazil, Singapore, the United States and Canada.

Jonathan explains, ‘We believe that the market has severely underestimated the growth prospects of fertiliser manufacturers. In late 2008 and the first half of 2009, against a backdrop of falling soft commodity prices, farmers looked to cut costs and opted to use up inventories. We took advantage of this share price weakness to build our exposure to our favoured companies in the sector as we believe they are good value and the market was being overly pessimistic about their prospects. We have now seen a tentative recovery in demand during the Latin American planting season in the fourth quarter and anticipate that this will continue into the Northern hemisphere planting season through 2010.

Furthermore, we expect that farmers in emerging markets, who have been the primary driver of incremental fertiliser demand over the last few years, will continue to increase their application rates in order to boost crop yields to keep up with rising domestic demand.’

Jonathan continues, ‘Food companies with a strong presence in emerging markets are also a key investment theme. Well-established companies with a good stable of brands coupled with strong distribution networks are ideal investment opportunities. It has been estimated that consumers in India, for example, spend approximately 70% of every new dollar earned on food and consumers in China around 40%. This compares to just 10% in the US.’