Agriculture is investment friendly, says MGA
Macquarie Global Assets has today released a research paper that finds agricultural assets in investment portfolios may provide significant benefits for investors.
The paper, ‘Investing in Agriculture’, found that “real assets are fast being considered a ‘natural’ addition to portfolios due to their diversification benefits in terms of both smoothing returns and reducing volatility”.
Agricultural assets can be diversified across different political and environmental conditions, the paper said.
It is well-known that Australia’s economy has been riding the boom caused by the demand for hard commodities from industrialising economies such as China and India.
‘Investing in Agriculture’ argues that these industrialising economies will also drive similar positive fundamentals for global food consumption.
The report quotes the United Nations Food and Agriculture Organisation (FAO) as saying the average cost of agricultural commodities have risen between 20 per cent and 50 per cent over the past decade.
According to the FAO, food prices rose by almost 40 per cent in 2007.
The Macquarie Global report found that there were some risks associated with investing in agriculture, including climate volatility, commodity price volatility and political risks.
It advised potential investors to make sure they had a thorough understanding of the areas in which they were investing.
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