An affiliate of Paris-based asset manager Amundi hopes to use its €42 million agriculture-focused equity fund as a pilot for a similar vehicle targeting institutional investors, according to its equity portfolio manager.
Stéphane Soussan told Agri Investor that the Food for Generations fund grew out of an internal reorganization that saw all of €1.4 trillion Amundi’s thematic equity offerings collected in a single wholly-owned subsidiary, CPR Asset Management. In addition to food, other themes grouped under CPR-AM include demographics, lifestyle and “disruptive” technologies.
Launched in September, CPR-AM’s ag-focused vehicle aims to bank on long-term trends including urbanization, growing animal protein demand in emerging markets and consumers’ increasing focus on health and convenience, Soussan said. CPR-AM defines the fund’s focus as stretching across the entire food value chain, covering notably land, fertilizers, seeds and machinery as well as infrastructure, processing assets, restaurants and others.
Using capital raised from retail and private bank networks across Northern Europe, Greece, Singapore, the UK and elsewhere, Soussan said the fund can invest almost anywhere around the world. So far, CPR-AM has deployed about half of its Food for Generations capital into companies listed on North American exchanges, with European corporates accounting for 40 percent of investments and Asian companies making up about 14 percent, Soussan said.
He explained that the Invest for Food Generations fund aims to outperform returns from the MSCI World Index over a five-year timeframe.
“For institutional investors, we need to have a longer track record before we can attract attention,” Soussan said, adding that while the firm would be happy to add institutions as investors to the existing Food for Generations fund, a separate structure is more likely. “Sometimes big institutional investors want a dedicated fund, but the idea will be the same.”
Companies engaged in primary agriculture represent about 30 percent of the fund’s current investments, which is the largest single-sector concentration, according to Soussan. Food producers’ share of total investments is slightly smaller at 29 percent, he said, adding that 18 percent of investments have been devoted to restaurants, 14 percent have backed beverage companies and a smaller percentage has been invested in food retail and water-related stocks.
“For institutional investors, we need to have a longer track record”
Acknowledging challenges ag companies often face in public markets, Soussan said that in selecting stocks for the fund, CPR-AM works to ensure first that it understands the current state of the agricultural production cycle.
“I can be wrong on the cycle, because of weather events, so the uncertainty is quite high,” he explained. “I don’t want to rely only on my ability to time the agricultural product cycle. I also want to own companies with a low sensitivity to this cycle.”
Animal health and nutrition companies, as well as ingredient companies, Soussan said, are examples of agriculture-related stock in the fund that have such a minimal exposure to production cycles and commodity markets.