This $124m (£95m) portfolio is managed by the thematic equities team at CPR Asset Management, which is a wholly owned subsidiary of Amundi.
Launched in March 2008, this Luxembourg Sicav aims to seek long-term capital growth by investing in a selection of equities issued by global companies that are active in the farm value space, from cultivation and breeding to activities supporting the entire industry. Stéphane Soussan, thematic equities portfolio manager on the fund, points out that the fund invests in the equities of soft commodity producers and service companies and not directly in soft commodities.
He explains: “Rather than adding to price pressure and speculation, our philosophy is to invest in companies that will enable the ever-growing world population to get access to sufficient and affordable food. We hold a long-term approach, and our goal is to identify throughout the entire upstream agricultural value chain the sub-sectors and companies that will most benefit from supply/demand imbalance and best deliver on their growth potential through a strong and sustainable development.”
The aim and investment process of the fund have remained constant since launch, although the manager notes investments “have been adapted to the market environment”.
While the fund is focused on stock selection, Mr Soussan acknowledges that macroeconomic factors such as regional economic growth, currency variations and geopolitical events – for example, when Russia banned some imports from some countries – are taken into account in the investment process.
He says: “The portfolio strategy has been maintained for two years. We have favoured sectors sensitive to volumes as grain harvests have been strong at the expense of sectors sensitive to agricultural prices. However, some fine-tuning has been made.
“In what we label agricultural services – firms involved in trading, transport and first processing of agricultural products into animal feed, oils and milling products – we have put more emphasis on value-added processing with ‘ingredient’ companies. Those firms are involved in the deep transformation of agricultural products into ingredients for personal care, food and other consumer sectors. They provide robust growth with low volatility.”
EXPERT VIEW - Darius McDermott, managing director, FundCalibre |
This is a nice steady performer in the sector and benefits from having had the same manager in place since 2008 – with a co-manager added more recently in 2013. It invests in companies throughout the farming value chain and is pretty concentrated in 36 stocks, with almost 60 per cent in the top-10 holdings. The fund has a slight overweight to the US and prefers Swiss and Canadian firms over those in Asia. However, the portfolio has a performance fee, of which I’m not a fan as it pushes the overall cost up to a high level. If you are willing to overlook this – and performance after fees does allow you to do so – it’s probably the most interesting in terms of risk-reward. |
Meanwhile, in the livestock section, which benefits from lower grain prices, the team has been adding companies with more research and development than the traditional meatpackers, such as animal health and animal feed firms.
The fund’s risk-reward rating sits at level six out of seven, while ongoing charges for the RU share class are 1.35 per cent, its key investor information document shows. It also has a performance fee of 20 per cent a year of any returns achieved above the S&P Global Agribusiness Equity index net total return.
For the five years to July 8 2016 the fund has delivered 18.5 per cent, data from FE Analytics shows, compared with the FO Commodity and Energy offshore sector’s average loss of 22.7 per cent. For the year to date the vehicle has returned an equally impressive 17.8 per cent, although it has lagged the sector average of 35.2 per cent.
Mr Soussan explains the fund has benefited from substantial positions in livestock, including meatpackers and fish farming, combined with a cautious view on fertilisers and farm machinery. He highlights livestock firms Tyson Foods, Marine Harvest, Salmar and Zoetis, as well as agricultural services businesses Archer Daniels and Ingredion as particular contributors to performance.
Looking ahead the manager points out: “We are getting closer to the key period of corn and soyabean harvests in the US. The US Department of Agriculture forecasts a 6 per cent increase in corn production and a 3 per cent decrease in soyabean production in 2016. These trends explain the significant rise in the soyabean price year to date and the fall in the corn price.
“Despite the decline in the US, the world soyabean production should be up in 2016 [and] therefore be another year of strong grain harvests. In this environment – favourable to volumes and less favourable to grain prices – we maintain substantial positions in agricultural services and livestock and stay cautious on farm machinery and fertilisers.”
