Institutional Interest in Farmland Continues to be Strong
Summary
Instead Agcapita seeks to mitigate any exposure to the operational risks of farming, and therefore minimise any degradation in its realized risk-adjusted returns, through implementing its strategy of solely acquiring farmland and renting its land holdings to farmers through upfront cash rental arrangements.Agcapita’s farmland funds continue to show great appeal to conservative investors concerned with inflation and the volatility of their existing public equity investments.Factors which could cause actual results or events to differ materially from current expectations include, among other things: risks associated with the ownership and operation of farmland, including fluctuations in interest rates, rental rates and vacancy rates; general economic conditions; local real estate markets; supply and demand for farmland; competition for available farmland; weather; crop diseases; the price of grain and other agricultural commodities; changes in legislation and the regulatory environment; and international trade and global political conditions.In addition, historically (i) Canadian farmland has exhibited similar inflation hedging qualities to gold, meaning it performs better in times of higher inflation, but with an ongoing cash yield that gold lacks, (ii) Canadian farmland has shown very low correlation to other asset classes, meaning its investment performance is largely independent of other investments, and (iii) Canadian farmland returns have shown low volatility with high absolute returns equating to favourable sharpe ratios, approximately 3.03 for western Canadian farmland versus -0.23 for the TSX 60, over the last 5 years (a higher sharpe ratio is an indicator of better risk-adjusted returns).In order to realize these very useful financial characteristics, Agcapita does not engage in operating farms as does Homestead Capital.Agcapita’s farmland funds continue to show great appeal to conservative investors concerned with inflation and the volatility of their existing public equity investments.