- Fertiliser manufacturers to drive Agriculture sector returns in 2010 -

12 January 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 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***. There is, therefore, huge investment potential as the growing levels of emerging market middle class consumers change their eating habits and increasingly move towards more protein based diets, mirroring their Western counterparts. 

Jonathan concludes,  “Whilst we anticipate further volatility in the commodity and equity markets, the business of feeding the world, changing dietary habits resulting from a burgeoning emerging market middle class and increasing demand from the biofuel industry is a long-term investment theme that should have a place in all well diversified investment portfolios.  Whilst there are plenty of investment opportunities in developed Western markets, we believe there are also many attractive ideas to be found in emerging markets around the world.  The current commodity cycle, whilst suffering a setback in 2008, is now firmly on a recovery path and demand is set to increase further.  The type of companies this fund aims to invest in have the potential to experience strong growth and therefore, provide attractive investment opportunities.”

Barings has been investing in global resources for over 14 years since the launch of the Baring Global Resources Fund which, also managed by Jonathan, currently has $1.1 billion in assets under management**.  

- Ends –

Notes To Editors *Source: All performance Baring Asset Management as at 31 December 2009. Performance is in sterling on a NAV per unit basis with net income reinvested. **Source: Baring Asset Management as at 12 January 2010 ***Source: Potash Corp, March 2008