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A Farmland Investment Primer
Report

A Farmland Investment Primer

Julie Koeninger
GMO, 2014
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Editorial Rating

8

Qualities

  • Innovative
  • Applicable

Recommendation

The United Nations expects global demand for food to grow 60% by 2050. At the same time, investors are increasingly seeking out alternatives to the stock and bond markets. Given these conditions, as well as a recent history of strong returns and low volatility, it’s no wonder that investing in farmland has become increasingly popular with institutional investors. But those considering adding agriculture to their portfolios need to make careful choices before plowing ahead, advises investment strategist Julie Koeninger. Her information-packed article examines farmland investing, including its risks and rewards. getAbstract suggests her analysis to institutional investors and financial advisers who’d like to dig further into this asset class.

Take-Aways

  • The benefits of investing in farmland include portfolio diversification, an inflation hedge, a low correlation to financial assets and the potential for strong returns.
  • Investors can hold this asset class either through direct ownership of the land or by investing with specialized portfolio managers that offer separately managed accounts, closed-end funds or co-investment options, among others.
  • Farmland investments have produced annualized returns of 12.5% since the mid-1990s and 17.5% since the mid-2000s, with income accounting for about half of the returns. During this period, farmland investments outperformed equities and were less volatile.

About the Author

Julie Koeninger is the product strategist for timber and agriculture at investment firm GMO.

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