Agriculture Asset Class
Agriculture as an asset class falls under the broad category of real assets.
Why Agriculture
Agriculture has become an attractive asset destination for a number of reasons.
- Strong Returns
- Agriculture has outperformed most asset classes throughout history, particularly on a risk basis when considering volatility. The NCREIF Index which is the world’s agriculture benchmark has yielded an annual return of 13.69% since 2000 with a standard deviation of only 7.58%.
- Inflation Protection
- As food prices are closely linked to inflationary trends, owners of agricultural assets and those exposed to farming businesses possess a hedge against inflation. This is one key diversification benefit of the asset class.
Population Growth
There will be 9.6 billion people in the world by 2050, that will require more than 70% more crops than we have today.
- Low Correlation
- Agriculture has been shown to have low correlation with many other asset classes such as equities and corporate debt, which dominate the investment market. This means that including agricultural in a portfolio can provide significant diversification benefits, resulting in an increase in portfolio return or reducing overall portfolio risk.
- Low Relationship with Economic Cycles
- Population driven food demand remains the core base of demand for agricultural commodities. The demand for food is relatively inelastic to income, making demand for agricultural commodities less subject to an economic slowdown.
Plantation Ownership
Agriculture as an asset class is known as a “Safe Haven” opportunity for a number of reasons
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