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POLITICALLY SENSITIVE: The World Bank has reported that prices of rice and other produce have risen 45 per cent in the past nine months on average across the globe, whipping up social unrest in many countries. -- PHOTOS: AFP, AP, REUTERS
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A BUMPER crop of agriculture-related investment funds has sprouted in Singapore recently, as fund managers rush to satisy the appetite of investors keen to put their money literally where their mouth is.
Soaring prices of agricultural commodities are whetting investors' appetite for these funds.
In the past week alone, at least four investment funds offering exposure to the performance of agricultural markets like rice, wheat and soya bean have been launched in Singapore.
The BNP Paribas Agriculture Fund hit the market on Wednesday, followed by the Barclays Global Agriculture Delta Fund the following day. These products are available to retail investors for a minimum investment of $1,000.
Affluent clients are also chasing this new investment theme. Merrill Lynch is distributing its Citrine Agriculture Booster Notes, linked to six indexes, and at least three private banks recently launched their own products.
Investors flush with cash after exiting volatile equity markets are said to be moving some money into the new funds, which are attracting attention as prices of food and other produce soar.
Global food prices have risen 45 per cent, on average, in the past nine months, whipping up social unrest in many countries, according to the World Bank. The rising prices reflect supply bottlenecks affecting agricultural products.
Competition for land for agricultural uses, urbanisation and biofuel production will further push up prices, said Mr Bill Barbour of Deutsche Bank's retail asset management unit, in a March report.
Meanwhile, gigantic populations in markets like India and China are consuming more food and other produce, investment guru Jim Rogers noted at the launch of the Barclays agriculture fund.
The fund offers exposure to the performance of the Rogers International Commodity Index-Agriculture, which comprises futures contracts for 20 agricultural commodities, including grains and lumber.
Agriculture plays are the 'most promising area of the commodities sector', and the 'bull run could last for 10 years', claimed Mr Rogers.
Since last year, Singapore investors have already seen a few agriculture funds on the market that give them a good hedge against rising inflation.
Last year, Deutsche Bank unveiled a DWS Global Agribusiness sub-fund in Singapore that invested in companies in the value chain from food production to consumption.
Another fund - the Castlestone Aliquot Agriculture Fund - offers wealthy investors exposure to agriculture, livestock and even water.
In early February, Schroder Asset Management had a soft closing of its agriculture sub-fund in Singapore.
The returns of agriculture funds have proved attractive so far, with industry players expecting index-linked funds to reach annual returns of 20 per cent.
Mr Christopher Wyke, a Schroders product manager, said in earlier reports that his firm's agricultural fund had delivered a total return of 35 per cent between October 2006 and January this year.
Meanwhile, BNP Paribas' agriculture fund, which is linked to several agricultural indexes, has risen by 25 per cent since its launch last year.
With more money pouring into agricultural funds, some worry that speculative activity may drive up the prices of agricultural products.
However, Mr Tan Yongsheng, a director of Barclays Capital Singapore for investor solutions, said speculators 'have less of an influence on real commodity prices than supply and demand factors'.
graceng@sph.com.sg
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