Diversification in Agriculture is Critical to Achieving Investor Objectives in the Asset Class
Agriculture aims to effectively meet the needs of investors seeking the benefits of diversification and an expansion of the efficient frontier of their portfolio. Even a modest exposure to the asset class can accomplish these objectives.
That being said, this is best accomplished through a highly diversified exposure to the asset class, one where the investor is exposed to the production of a broad range of foods, across multiple geographic locations and ultimately, that food and fibre being consumed by a wide variety of end markets.
The incremental addition of the agriculture asset class can meaningfully enhance total portfolio efficiency by improving the risk-adjusted return profile, due to agriculture’s historically low correlation with other asset classes, its resilience during periods of volatility and its inflation hedging characteristics. These are common reasons why allocations in agriculture are increasing among institutional investors. Periods such as the Global Financial Crisis, COVID or the Inflation Spike / Rate-Hike Bear Market of 2022 are recent events where agriculture has proven to be a very beneficial asset class to hold.¹
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