Trend 2018: Maturing into the mainstream

Agri’s potential for non-correlated cash generation and a push into sustainable investment mean the asset class could pass a tipping point next year, according to Insight’s Detlef Schoen.

As we have explored throughout 2017, the drivers behind growing institutional interest in agriculture are easily summed up.

According to Detlef Schoen, head of real assets at Insight Investments, such appetite owes much to the asset class’s “potential for cash generation and real long-term growth, low correlations to mainstream assets and exposure to attractive supply/demand dynamics.”

In 2018, though, they may acquire a new status. “Today, farmland investments are potentially at a double inflection point, in terms of both return potential and significance for investors,” he told Agri Investor.

In the near future, he expected interest to grow across regions including Australasia and South America, with investors also looking at “aggregation/conversion/irrigation opportunities in eastern Europe, Portugal and Spain as well as post-Brexit UK” on an opportunistic basis.

Schoen believes the best way to capture the primary benefits of the asset class – which he describes as low correlation to both equities and bonds, and an “inflation hedge with return” – is a “thematic, low-risk, ESG-driven and open-ended allocation strategy investing in an actively managed portfolio diversified by geographies and products.”

“As we move into 2018, we expect this maturing into the mainstream to continue,” he predicted. “Not least because of the boom in popularity of sustainable investment, given that farmland projects lend themselves, by their very nature, to the pursuit of sustainable development goals.”