bigfatpurse

Sunday

Getting an exposure to agriculture

Market makers recently swamped the market with offers for retail investors to gain exposure to agriculture. Many retail investors are lured by the rising cost of agricultural products, to either hedge or take advantage of the situation. Here are some of the products that I have found:

BNP Paribas Agriculture Fund

- Tracks 2 agriculture indices: S&P Goldman Sachs Commodity Index Agriculture & Livestock, Dow Jones AIG Agriculture
- Minimum initial investment of S$1,000
- Cash or SRS, CPF investment not allowed
- Upfront sales charge of 5% (max), depending on distributor
- Management fee = 1.5% p.a.
- Available at ABN Amro, CIMB, dollarDex, Elpis, Finexis, Hong Leong Finance, iFAST, Aviva Navigator, PIAS, PhillipCapital and Standard Chartered
- Propectus and Factsheet available here

Barclays Agriculture Delta Fund

- Tracks Rogers International Commodity Index - Agriculture
- Cash or SRS, CPF investment not allowed
- Upfront sales charge of 5%, depending on distributor
- Management fee = 1.25% p.a. (max)
- Admin fee = 0.2% (max)
- Minimum S$1000 or US$1000 and subsequent amount of S$100 or US$100 respectively
- Available at DBS and Standard Chartered

DWS Global Agribusiness

- invests worldwide in equities of issuers operating in or profiting from the agricultural industry
- Upfront sales charge of 5% (max), depending on distributor
- Management fee = 1.5% p.a.
- Minimum S$1000 or US$1000 or EUR 1000 and subsequent amount of S$1000 or US$1000 or EUR 1000 respectively
- Available at ABN Amro, CIMB, CitiBank, DBS, dollarDex, Elpis, Finexis, First Principal Financial, Fundsupermart, Hong Leong Finance, HSBC, iFAST, MAA Financial Planners, Maybank, Aviva Navigator, OCBC, PIAS, PhillipCapital, RHB Bank, Standard Chartered and UOB
- More info here.

Citrine Agriculture Booster Notes
You can find out more from the concise write up from Lioninvestor.

RICI Enhanced Agriculture Index Zero Cert
- Certificate listed on SGX
- Counter name: AA ZPC RICIAGR110228
- Read more on certificates or go to product webpage

ABN AMRO World Farmers Index Zero Cert

- Certificate listed on SGX
- Counter name: AA ZPC FARMERS110223
- Read more on certificates or go to product webpage

My opinion:
I would not invest in Citrine Agriculture Booster Notes and certificates as they are derivative products (if you do not know, don’t play with them). Secondly, DWS Agribusiness is not investing directly into commodities but rather the businesses that operate in the agriculture sector. Rising agriculture prices may not lead to profits for the operators as cost of operation may rise in tandem. In addition, it is proven that there is weak correlation between commodities and stocks. Investors would naturally shun away from the stock market during commodities bull run. Since the fund invests in equity, it may not enjoy the gains as compared to a direct investment in commodities.

One common problem of active managed funds is its charges. All 3 funds incur an upfront charge of 5% and an average management fee of 1.5%. Thus, you are already at negative 6.5% at the start of your investment. You have quite a bit of lost ground to make.

If I am to invest in a commodity unit trust, I would choose Barclays Global Commodities Delta Fund. Why? It is a wider and more diversified fund tracking the entire RICI while its sister Agriculture Delta Fund only focuses on the RICI agriculture components. Oil is likely to hit US$200 per barrel as forecasted by Dr Stephen Leeb in The Coming Economic Collapse and would be an important component in RICI but not present in RICI - Agriculture.
This is my personal opinion and not an advice for you, nor is an invitation to invest.