To Hilary Schmidtinternational banker
aAs the world continues to deal with the grim specter of surging inflation this year, countries around the world are scrambling to contain runaway prices while trying to keep their economies from entering deep recession territory. Few sectors have seen more price increases than groceries and contributed significantly to the global inflation frenzy. It is undeniable that it has been a year for investors to expand their exposure to the food sector, be it agricultural commodities, food and beverage products or even auxiliary industries such as food processing equipment.
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The most direct way to gain exposure to the food sector is through direct investment in agricultural commodities. This can be done by identifying a particular commodity and investing in a futures contract for that commodity. Or you can join a fund with broader exposure to agricultural commodities, which is becoming more common these days.of Rogers International Commodity Index – Factors associated with Agriculture Total Return (RJA)For example, the exchange traded security (ETN) that tracks the performance of the Rogers International Commodity Index is the Agricultural Total Return, a well-known index representing a weighted basket of the 20 most liquid agricultural futures contracts. It is also a sub-index of the broader Rogers International Commodity Index.
The fund was launched in 2007 and had approximately $190 million in assets under management (AUM) at the end of July. Nonetheless, this ETN has performed strongly year-to-date, generating profits of over 8%. Also, the 1-, 3-, and 5-year returns are all excellent, at 20.2%, 77.9%, and 52.8%, respectively. The fund’s largest constituents are wheat (20.06%), corn (13.61%), cotton 11.60%, soybeans (8.60%) and coffee (5.73%).
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However, there is no denying that the commodity asset class is often very volatile, rarely shown more clearly than in 2022 and should be added. Houses can also invest in exchange-traded funds (ETFs) that focus on food and beverage companies. ETF performance is typically less volatile than the underlying agricultural commodity.
of Invesco Dynamic Food & Beverage ETF (PBJ) is one such fund. In fact, it is the oldest food-only ETF. At least 90% of total assets are invested in the Dynamic Food & Beverage Intellidex Index, which is comprised of securities of 30 US food and beverage companies. These companies are primarily engaged in the manufacture, sale, or distribution of food and beverage products, agricultural products, and products related to the development of new food technologies. Funds and indices are rebalanced and reconstituted quarterly in February, May, August and November.
As such, PBJ offers investors a lower risk equity investment option than agricultural products, as demonstrated by the fund’s performance over the years. Year-to-date performance is 1.7%, but Year 1 (11.2%), Year 3 (11.3%), Year 5 (8.3%) and Year 10 (10.1%) are all impressive. Its holdings are a roughly even mix of small, mid and large caps, with a roughly even distribution of growth, blend and value stocks. It also has a relatively even fund distribution compared to other food ETFs such as General Mills (5.5%), Keurig Dr. Pepper (5.4%), Cisco Corp (5.3%), Hershey (5.2%) and PepsiCo (5.1%). is. Companies with the greatest weight.
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Alternatively, if a mature food company doesn’t interest investors for whatever reason, there is also an opportunity to broaden your horizons and target more complementary aspects of the huge food ecosystem. For example, if you are more interested in companies engaged in agricultural activities, it pretty much combines many of the desirable qualities of both his RJA and his PBJ funds mentioned above. the return of the latter).
VanEck Agribusiness ETF (MOO) It provides just that kind of exposure. The fund tracks the performance of the MVIS Global Agribusiness Index, which is composed of companies involved in agrochemicals. Animal Health; Fertilizers; Seeds and Traits; Agriculture and Irrigation Equipment and Machinery; Aquaculture and Fisheries; Livestock;
The fund currently invests in 52 companies, more than half of which are based in the United States. Germany, Canada, Japan, Chile, Norway, China, UK, Brazil and Australia make up the remaining top 10 locations. Perhaps even more surprising is the diversity of sector exposures, with materials (32.5%), consumer staples (30.4%), industrials (19.3%) and healthcare (17.8%) being the main components.
And with $1.6 billion in assets under management (about $500 million inflows since war broke out in Ukraine in late February), MOO is one of the largest food/agriculture ETFs in the space. Short-term performance was somewhat mixed, with him up 6.3% in July but less impressive three-month and year-to-date performances of -6.8% and -3.7% respectively. However, the long-term returns are solid, with 1, 3, 5 and 10 year returns all positive, at 1.34%, 12.62%, 11.63% and 8.34% respectively.
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Given the importance investors place on environmental, social and governance (ESG) issues when deciding which asset classes and investment vehicles they seek to fund in today’s market, VanEck Recently, Sustainable Food Future UCITS ETF (VEGI)Eligible companies for the fund must meet specific ESG criteria related to food and agriculture sustainability and safety. According to VanEck, the fund “invests in companies that are pioneering new ways to feed a world population of 8 billion people, primarily through:
- Invest in companies that are at the forefront of new forms of sustainable food transformation.
- Gain diverse exposure to companies offering meat and dairy alternatives, organic foods, food flavors, or innovative agricultural technologies.
- Access companies that could get half of their revenue from the sustainable food revolution.
- Avoid companies that violate the principles of the United Nations Global Compact, companies that profit from controversial weapons, participate in the fossil fuel sector, nuclear power, civilian firearms and tobacco.
The fund is part of the MVIS Global Future of Food ESG, comprising the largest and most liquid companies providing products and services related to meat and dairy alternatives, organic foods, food flavors and innovative agritech. Track index. This includes companies that derive at least 50% of their revenue from plant-based or cultured meat, protein, or dairy alternatives. vertical or urban agriculture; precision agriculture, including companies involved in irrigation and smart water grid equipment; greenhouse equipment; autonomous and robotic agriculture; or agricultural equipment. However, pesticides and plant seeds are excluded. Food flavors and functional ingredients; organic or health foods;
VEGI currently has a portfolio of 35 companies, with US multinational food provider Ingredion (7.7%) holding the largest weighting (7.7%) and Canadian dairy company Saputo (5.4%). ), Irish food company Kerry Group (5.0%) and US pack bakery. Food company Flowers Foods (4.6%) and US specialty ingredients company Balchem Corp (4.6%).