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Amidst Financial Turmoil, Agriculture is a "Good Place to Be"

Global macro trends continue to strengthen the case for agriculture investing, despite the sputtering global economy.

During these times of market instability, “real assets” such as metals, land and agricultural commodities have become more attractive to investors wary of putting their money into financial assets.

“When there is long-term instability there tends to be a flight to real assets,” said Mike Boehlje, an agricultural economist at Purdue Extension.  “People move away from financial assets.  Agriculture is a real asset industry, so that does offer some protection.”

Population growth and dietary changes across the developing world are increasing the demand for meat and livestock.  This in turn increases the demand for grain to use as feedstock.  Growing production of ethanol is contributing to demand as well.

The agriculture sector remains strong, particularly in light of conditions across other industries.  “Other industries are downsizing, some even permanently,” Boehlje continued. “Relatively speaking, agriculture is a good place to be.”

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Anric Blatt & Lauralouise Duffy Discuss Opportunities in Agriculture & Water on HedgeFundsReview.com

Click here to watch the video interview with Global Fund Exchange portfolio managers Lauralouise Duffy and Anric Blatt on Hedge Funds Review

Chairman Anric Blatt and CEO Lauralouise Duffy of Global Fund Exchange talk about the challenges of a multi-manager fund of funds focusing on commodities, energy, water and agriculture strategies.

Global Fund Exchange, a fund of funds with expertise in the commodity, agriculture and energy sectors, has a different way of constructing portfolios as well as viewing the markets.

“We look at energy as what we call the bridge period. The bridge period represents traditional energy becoming cleaner and more energy efficient while clean energy becomes more cost efficient and more easily accessible,” explained CEO and principal Lauralouise Duffy.

“If you look at energy over the last 20 years, 1990-2010, you’ll find that 83% of all new energy demand was met by fossil fuels. However, going forward from 2010 to 2030 we are anticipating a 40% increase in energy demand across the globe. Of that energy we predict that 64% will be from traditional energy sources,” she added.

According to Duffy, Global Fund Exchange looks to find the “most efficient, cost-effective and easily accessible energy there is out there”. Duffy and chairman and principal Anric Blatt agree that both traditional and new energy sources are “intrinsically aligned”. If investors look at these two in isolation, they “will see a lot more volatility”.

“We have a theme: people, climate, profit. We need to meet the needs of the people. We need to be respectful of the planet but nothing happens unless profitability is built into it. Our investors want to be in this space but when you try to play it in isolation, through the water sector or through the clean energy or natural resources sector, you have a lot of volatility,” explained Duffy.

“What we have created is a way to invest in what we call the future of energy,” she continued, “a way to put your toe in the water without risking losing your whole leg. We’ve found that people are very excited to have the opportunity to play emerging energy – the clean energy, agricultural and water sectors – and simultaneous playing the entire energy revolution. We do this by managing each portfolio as a separate portfolio that is geographically, sub-sector and asset-class diverse.”

Blatt gives an example. “We are really looking for the tried and tested energy analysts who truly understand the infrastructure, yields on that infrastructure, financing customers and so on.” He believes in the financial sense of energy projects, where it is a good investment and not because “we want to be clean and green”.

“We have very deep research into the big macro factors shaping the world: what does the next 50 years look like, what are the big picture themes? We go and find the best niche experts in that particular geography or sector and then start due diligence. That takes a very long time. We want to be ready. When we want deploy money into carbon or clean energy in , say, Northern Europe, we know who is the best manager on the spot,” said Blatt.

Duffy has been a principal of Global Fund Exchange since 2006. She has a 21-year career in finance and hedge funds across a range of asset classes in emerging and developed markets.

Blatt has been with the Global Fund Exchange group since its founding in 2005. His principal areas of focus include strategy allocation, portfolio management, manager research, due diligence and new product development and structuring.

Global Fund Exchange specialises in tailor-made multi-manager portfolios for a broad range of clients including pension funds, sovereign wealth funds and other institutions in global tactical asset allocation, alternative investments, energy, commodity and multi-strategies.

Originally, Global Fund Exchange was established in Hong Kong and Switzerland to provide fund establishment, seeding and legal infrastructure, independent risk monitoring and compliance for emerging managers. The group relocated to the US in 2007 where it carries out fund management including portfolio construction, manager selection, due diligence, macro overlay, asset allocation and portfolio management. The group companies provide independent risk monitoring and ongoing due diligence to institutional clients across all asset classes and managers in its portfolios.

 

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Asset Owners to Increase Allocations to Thematic Investments: New Study

The risks of global climate change are significant,  but major global asset owners and asset managers are realizing that these challenges also present profitable investment opportunities.

A recent study asks:  Are these asset owners being proactive enough in seeking climate change investment opportunities?  The answer  – not nearly enough.

The study, conducted by Mercer and jointly published with the Institutional Investors Group on Climate Change (IIGCC), the North American Investor Network on Climate Risk (INCR) and Australia/New Zealand Investor Group on Climate Change (IGCC), analyzed responses from 44 asset owners and 46 asset managers with collective AUM of over $12 trillion.

Results show that these asset owners and managers are beginning to incorporate climate change issues into their investment procedures, but they have not been proactive in shifting asset allocation models to capture opportunities in climate change related fields.

Activity varies greatly by geography.  U.S. investors, for example, are lagging behind their counterparts in Europe, Australia and New Zealand.

Strong climate policies in the European Union has contributed to a greater integration of climate change across the portfolios of European investors, while Australian investors are becoming more focused on policy advocacy and addressing the “physical needs” of climate change.

In the United States, however, the lack of national energy and climate policy left investors in an uncertain environment.  U.S. investors concentrate more on engaging with companies rather than integrating climate change issues into their portfolio valuations.

Despite all this, the report highlights a significant and growing trend –  increased interest in climate change focused investment opportunities among global investors.

Over half of the investors surveyed invest in funds with a focus on climate change, and 45% of surveyed asset owners will considering allocating to thematic investments over the next few years.

Read the IIGCC press release

To learn more about the thematic investment opportunities offered by Global Fund Exchange, please click here or read about our white label portfolio construction expertise.

 

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How does Global Fund Exchange invest in Clean Energy?

Global Fund Exchange has pioneered the concept of “Investing in the Future of Energy.” We utilize a global macro, multi-strategy investment approach which is diversified by geography, sector, asset class and themes – which we have found creates uncorrelated performance in the portfolio.

Click here to learn more about our clean energy investment strategy and see how we are taking advantage of the evident investment opportunities in this growing sector.

Read our posts on clean energy to learn how the industry is developing and becoming more mainstream.

 

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Read our April 2011 Newsletter – Now Available

The April 2011 edition of Global Fund Exchange’s “Investing in the Future of Energy” newsletter is now available on our website.

Top stories this month include:

  • Investments in Solar Energy
  • Development of the Smart Grid
  • Halt to Libyan Oil Production
  • Surging Global Auto Sales
  • Water Security – Nations at Risk

Click here to download our latest edition or register here to join our mailing list.

 

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Water Security: Oil producing Middle East and North African countries dominate Maplecroft water security risk list

Lack of stable supplies may lead to future oil price hikes and regional unrest

Extreme water security risks across the Middle East and North Africa (MENA) may lead to further increases in global oil prices and heightened political tensions in the future, according to a new study, which rates the region as having the least secure water supplies in the world.

The Water Security Risk Index and map, developed by risk analysis and mapping firm Maplecroft, rates 18 countries at ‘extreme risk’ with 15 located in the troubled MENA region. These include: Mauritania (1), Kuwait (2), Jordan (3), Egypt (4), Israel (5), Niger (6), Iraq (7), Oman (8), United Arab Emirates (9), Syria (10), Saudi Arabia (11), Libya (14), Djibouti (16), Tunisia (17) and Algeria (18).

The index and map has been developed to enable business and investors to identify the countries where water supply will be limited or interrupted in the future. Maplecroft calculates water security by measuring countries’ water stress; population rates; reliance on external water supplies; sustainability of water use; intensity of water use in the economy; government effectiveness; and virtual water use, which is a unique assessment of the water intensity of imported goods, such as food and oil.

Of the 12 Organisation of the Petroleum Exporting Countries (OPEC) members, six – Algeria, Iraq, Kuwait, Libya, Saudi Arabia and the UAE, are in the highest risk category, whilst a further two – Iran and Qatar – are rated ‘high risk.’ Collectively, these countries produced approximately 30% of global oil production in 2009, whilst the countries at extreme and high risk collectively produced 45% of global oil in 2009.

A lack of access to water can have a great number of direct and indirect effects and the repercussions can reverberate globally. Of particular importance to the global and local economy is the use of large quantities of water in the production of oil. “Lift water,” which some companies source from aquifers, is used to force oil out of the well that would not rise under its own pressure from the geology. This process is undertaken to prolong the economic lifespan of the well, and allow a greater volume of oil to be extracted. If sufficient water is not available productivity will decrease and operations will be interrupted, which could significantly affect global oil supply and prices.

Read the complete article

Read our previous posts on water security

“Technological innovations, including the desalination of salt water, may however alleviate some of these risks. The annual volume of desalinated water in Saudi Arabia is planned to double from 1.05bn m3 to 2.07m3 between 2010 and 2015 under a 5 year infrastructure spending plan. As part of these plans the world’s largest solar power desalination plant is planned to provide 10million m3 per year. Desalination accounts for about 50% of the country’s drinking water, with 40% coming from ground water, 9% from surface water and 1% from waste water.”

 
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Posted by on March 23, 2011 in Policy, Water

 

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The Age of Anthropocene… – by Lauralouise Duffy

“The Age of Anthropocene” – a new name for what some scientists call a geologic epoch, whereby Man is responsible for the catastrophic changes on the planet, particularly in agriculture and water.

According to a recent article in National Geographic, it is not the building of magnificent cities or the innovative technologies of the last 25 years that scientists will remember thousands of years from now.  Rather it is the massive impact that humans have on the planet that will leave a sign for future geologists and scientists.

Human impact on the world has become a lot more obvious in the last 150 years in part because the population has quadrupled to nearly 7 billion people.  Additionally, affluence has clearly led to greater consumption of energy and other resources, while technology provides new tools for exploiting and consuming.  These factors have compounded since 1900.  The threats are widespread..

Ocean acidification is a global threat to sea life and coral – representing a major cause for extinction.  As carbon dioxide warms the planet, it also seeps into the oceans and acidifies them.  Bi-products of oil such as plastic and other chemicals are toxifying our oceans and creating dead zones where no sea life can survive.

Extinction of plants, animals and habitats is happening at a rate hundreds of times higher than during most of the past half billion years, according to geologists.  Three top reasons for animal extinction are:  Deforestation, Destruction of Habitat & Global Warming.

Agricultural Waste:  Nitrogen runoff from fertilized land causes dead zones at the mouths of rivers and poisoning freshwater resources worldwide.

Waste & residue from harvesting of coal and oil results in destroying freshwater supply.

Leveling of the world’s forest changes the ecosystems and is a major cause of extinction for animal and plant life, erosion and global warming.

Watch our videos on People, Planet, Profit

As scientists debate what our planet looks like as a result of the Age of Man (now being coined the Age of Anthropocene), perhaps it is time for Mankind to write our own history. 

I agree that it is time to focus on the consequences of our collective action in the here and now.  Human actions have an undeniable impacts on our planet’s water, food and natural resource supplies – all of which are essential for life on Earth.

By Lauralouise Duffy, CEO of Global Fund Exchange

 

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