Annual MeetingIstanbul 13-14 October 2010Fund investments.ppt

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1、Annual Meeting Istanbul 13-14 October 2010 Fund investments in Food and Agribusiness Recent trends in ECA,Outline of Presentation,Key investment drivers Whats being said about investment in agriculture Ways to invest in agriculture Investment structures Fund Investment process Target markets Broad c

2、lassification of funds investing Funds active in ECA overview Funds illustrative examples Farmland funds current issues/revised strategies/ outlook Impact of farmland funds Additionality of funds/ private equity expertise Examples of other fund strategies Future trends/ issues,2,Key Investment Drive

3、rs - Food Sector 1/2,BASIC PREMISE“A looming imbalance in the supply and demand of food commodities will result in a prolonged period of higher food commodity prices”Factors affecting DEMANDPOPULATION GROWTH Global population increase - from 6.5 BLN to 9.0 BLN by 2050 Middle class increase - from 43

4、0 MLN to 1.15 BLN by 2030CHANGING GLOBAL FOOD CONSUMPTION TRENDS - as incomes rise Esp. in China and India Switch from starch-rich to protein-rich diets Professionalization of meat industries will demand more grain Move towards processed/ branded foods offers higher profit margins and adds further i

5、mpetus to investments,3,Key Investment Drivers - Food Sector 2/2,Factors affecting SUPPLYSUPPLY CONSTRAINTS: PRODUCTION LIMITS: Industrialization, urbanization, water limitations, climate change SLOWING PRODUCTIVITY GAINS: GMO acceptance low only corn (USA) and soya (USA/ South America)IMPACT OF BIO

6、FUELS Diversion of crops and farmland Though impact less than initially anticipated,4,HJ Heinz Company Anticipated growth in Emerging Markets,“Emerging Markets are on track to deliver at least 20% of our total sales by 2013, more than double their contribution of just five years ago,” Mr. Johnson sa

7、id. “Heinz is already well-established in Emerging Markets like China, India, Indonesia, Latin America and Russia, where we have strong brands, local marketing expertise and the infrastructure necessary to sustain strong growth.” “Emerging Markets are key to unlocking future growth because their eco

8、nomies are growing at a significantly higher rate than developed markets; the middle-class in Emerging Markets will eventually outnumber the combined populations of the U.S. and Europe; and per capita consumption of packaged foods in Emerging Markets has significant upside.”William R. Johnson, Chair

9、man, President and CEO, H.J. Heinz Company, Pittsburgh, 31 August 2010,5,Key Investment Drivers - Farmland,Perception that farmland is fundamentally UNDERVALUEDGains to be achieved from: CAPITAL APPRECIATION (Russia $700/ha vs Brazil $3500/ ha) PRODUCTIVITY IMPROVEMENTS (e.g. wheat yields 2.5t to 5.

10、0t+) LONG TERM HIGHER COMMODITY PRICES Farmland an UNCORRELATED/ COUNTER-CYCLICAL ASSET Farmland an INFLATION HEDGE FSU has 13% of global arable land up to 30 million hectares may be idleFarmland is second oldest form of investment after the family cave,6,Whats being said about investment in agricul

11、ture,Jim Rogers, the hedge fund manager who predicted the start of the commodity rally in 1999, said global warming will hinder crops and has advised purchasing farmland for at least a decade. Because of the disruptions, agricultural prices will go through the roof, he told reporters in Melbourne on

12、 7 February 2007 I am extremely bullish on agriculture.“The race is on not only to feed the world, but also to produce more quality food to meet the changing nutritional needs of an increasingly affluent population.” Bill Barbour, Investment Specialist at DWS Investments.“Sell banks, buy cheese,“ Cr

13、ispin Odey, Odey Asset Management. Financial Times 25 April 2008“My boss wants to create the first Exxon Mobil of the farming sector”. Joe Calvin, Altima One World Agriculture Fund,7,Whats being said about farmland,“Im convinced that farmland is going to be one of the best investments of our time. E

14、ventually, of course, food prices will get high enough that the market probably will be flooded with supply through development of new land or technology or both, and the bull market will end. But thats a long ways away yet.“ - George Soros, June 2009“People are obsessed with real assets now. They w

15、ant things they can touch,“ said Olivier Combastet, founder of Paris-based Pergam Finance, which has $1 billion in assets and two years ago formed Campos Orientales, a fund that buys farmland in Argentina and Uruguay. Three years ago people were skeptical about investing in farmland . (now) its beco

16、me much more sexy. Reuters, 22 June 2009“Corn Farms Replace New York Lofts as Hottest Property” - Bloomberg 20 Feb 2007,8,Ways to invest in agriculture,Agricultural commodities (futures, options, ETFs) Direct investment in agricultural equities Publicly quoted Private equity Direct farmland investme

17、nt Collective investment funds,9,Example: Investment Structures,Funding sources may include private equity, sovereign wealth funds, high net worth individuals, family offices, other institutional investors, etc,Example: Alpcot Agro,Examples: Trigon Agri, Black Earth Farming,10,Fund Investment Proces

18、s,Optional structures: special purpose fund vs direct investment Returns created through one or combination of three factors: debt repayment, or cash accumulation through cash flows from operations operational improvements that increase earnings over life of investment multiple expansion - selling i

19、nvestments for higher multiple of earnings than originally paid Fund investments typically realized after some period of time, varies depending on the investment strategy (farmland 5- 7, now up to 12 years ?) Investments typically realized through: Initial Public Offering (IPO) Merger or acquisition

20、 Recapitalization,11,Typical fund investment structure,12,Target markets - Global,SEGMENTS/ SECTORS Land and crops Food processing Agri-sector linkages (fertilizer, logistics, other inputs) Commodities (ETFs etc)GEOGRAPHIC FOCUS DEVELOPED MARKETS USA/ Canada Australia/ New Zealand EU EMERGING MARKET

21、S ECA (Russia, Ukraine, new EU countries) Latin America (Brazil, Argentina, Uruguay, Paraguay) Asia (India/ China) South Africa FRONTIER MARKETS Africa (Sudan, DRC, Angola),13,Target Markets - ECA,LAND AND CROPS Russia and Ukraine large scale farming Farming in Romania, Slovakia, Bulgaria (e.g. Agro

22、Terra North) target opportunity to exploit EU subsidies Bulgaria REITs (e.g. Advance Terrafund) (IFC an investor) Latvia, Lithuania (existing agro holdings)GENERAL FOOD AND AGRIBUSINESS Russia and Ukraine, listed equities (no specific region-focused funds) New EU countries (e.g. REEEP fund partially

23、 targets food companies)CENTRAL ASIA/ CAUCASUS Generally only SEAF funds Recent example: East Capital Explorer investing in Georgian food retail chain Populi,14,Broad Classification of funds Typical Defining Features,BY MANDATE Direct Mandate (private equity funds) Discretionary (e.g. SEAF) how to d

24、escribe REEEP BY STRUCTURE Fund structure Direct investments (through investment manager) BY INVESTMENT FOCUS Land and crops Equities listed/ unlisted Combinations (listed/ unlisted equities, or physical assets) REITs/ only farmland BY GEOGRAPHIC FOCUS Country/region specific Global BY DEVELOPMENT F

25、OCUS: SEAF,15,Funds active in ECA General Food and Agri funds,Examples of GENERAL FUNDS targeting food and agri in ECA (and globally):GAIA invests in “up-stream farming companies, farmland, equipment and technology, and related businesses in emerging regions where scale and costs offer competitive a

26、dvantages and growth rates are high” Altima One World Agriculture Fund invests “primarily in farmland and in world class farm operators (“agro champions“ with strong franchise value), both in listed and unlisted investments” IFC invested $75m Pharos Miro Fund creates returns “through acquiring agric

27、ultural land, supporting infrastructure assets, and distressed operational farm holdings” Trigon Emerging Sector Agri Fund invests in listed food and agri coys DWS Global Agribusiness Fund - a managed portfolio of global agribusiness companies (currently 2.6% in Ukraine)There are no dedicated geogra

28、phic/ thematic funds in food sector in ECA, so far,16,Funds/PE active in ECA - Land and Crops,Examples of funds active in LAND AND CROPS in ECA: NCH (Russia/ Ukraine). FUND. 425,000 ha +. Unlisted Black Earth Farming (Russia). DIRECT. 330,000 ha. Listed FirstNorth Rencap (UAFL) (Ukraine). DIRECT. 33

29、0,000 ha. Unlisted Alpcot Agro (Russia/ Ukr). FUND. 175,000ha. Listed FirstNorth. Trigon Agri (Russia/ Ukraine). DIRECT. 169,000 ha. Listed FirstNorth Landkom (Ukraine). DIRECT. 74,000 ha. Listed AIM. Volga Farming (Russia). DIRECT. 60,000 ha. Unlisted Agro Generation (Ukraine). DIRECT. 50,000 ha. U

30、nlisted First Farms (Slovakia/ Romania). DIRECT. 15,400 ha. Listed FirstNorth. Northbridge (France/ Romania). FUND of FUNDS. 550 ha. Unlisted Bulgaria REITs (6 funds). FUNDS. 50,000 ha. Ceres Agrigrowth Investment Fund listed on Bulgaria Stock Exchange (IFC an investor),17,Context of land holdings b

31、y funds within Russia and Ukraine,Total arable land in Russia: 121 million ha (45m ha grains) Total arable land in Ukraine: 32 million ha Total land acquired by funds: 1,7 million ha (1.1% of total)Top 10 Russian agro holdings control 3.5 million ha + Largest fund/PE investor: Black Earth Farming (3

32、23,000 ha) Largest land holder in Russia 570,000 ha (Prodimex) Largest land holder in CIS 1.1 million ha (Ivolga)Definitions of land in control and land in ownership: Land in control is registered land and land where a subsidiary of the company, either itself or in the name of agents, has registered

33、 a lease agreement or is in the process of registering a lease agreement with local authorities. Land in ownership is registered land and the indirect ownership of land within the Russian Pai system. The Pais can be registered either in the companys subsidiarys name or in the name of an agent acquir

34、ing Pais on behalf of the companys subsidiary within the framework of legally binding contracts, or is in the process of entry into the land register with local authorities.,18,Funds/PE - Illustrative Examples (7),FARMLAND Alpcot Agro Russia and Ukraine Trigon Agri Russia and Ukraine Insight Global

35、Farmland Fund GlobalGENERAL FOOD AND AGRI AgriSar Global food and agribusiness Pictet - Global food and agribusiness Trigon Emerging Agri-Sector Fund Resource Eastern European Equity Partners Fund,19,Alpcot Agro,Established 2006/7 Six share issues to raise SEK 1.34 billion Fund Objective “ to genera

36、te an attractive return on invested capital by acquiring and farming agricultural land in Russia and other CIS-states. Operational strategy is to engage in highly efficient integrated agriculture in accordance with Western best practice, in three parts of the value chain: cultivation of the land, st

37、orage and sale”. Alpcot controls 190,000 ha in Russia 9,800 ha in Ukraine Of this, approx 72,000 ha harvested in 2010 Listed on NASDAQ OMX First North Exchange in Oct 2009 ,20,Alpcot: investment strategy,Investment opportunities evaluated on: Quality of the soil and precipitation Size of farm - at l

38、east 10,000 hectares needed to achieve efficient scale Proximity to urban centers to facilitate recruitment Proximity and access to infrastructure Geographical diversification to reduce exposure to local weather Geographical extension along a north-south axis to extend planting and harvest seasons a

39、nd enable optimal utilization of machinery Strong relationships with local decision makers and stakeholders,21,Alpcot: shareholders,Example to illustrate shareholders profile Alpcot had approx. 1,000 shareholders at 31 March 2010,22,Trigon Agri,Established in 2006 by Trigon Capital investment group

40、Integrated cereals and dairy producer, storage and trading Strategy: focus on large-scale farming clusters within small geographical areas clusters between 40,000 and 100,000 ha develop integrated production and trading by acquiring grain storage integration enables profit maximization throughout va

41、lue chain Operations in Ukraine, Russia and Estonia Start-up equity capital (19.6m) from Trigon Capital and Finnish high net worth individuals Total equity raised 175 million Current market cap 84 million Listed on Nasdaq OMX First North exchange - May 2007 ,23,Insight Global Farmland Fund,Fund of f

42、armland holdings Established 2008. Target $300m Insights view: “Farmland provides the complete thematic exposure” Target return 15% per annum Achieve diversification from geographical spread and commodity range 3 components to investment return: Rising commodity prices Land value appreciation Active

43、 Alpha Variety of holdings: stakes in vehicles incorporated exclusively to hold farmland assets listed farmland companies direct ownership of farmland debt covenants over farmland stakes in existing farmland funds,24,Sarasin AgriSar Fund,Fund launched March 2008. Current AUM - GBP 109m Global focus

44、across full spectrum of equities, land and commodities Sarasin & Partners LLP: London-based investment management firm. Bank Sarasin listed on Swiss Stock Exchange - majority shareholder Rabobank. Invests at all stages of agricultural production - from land, fertilizer, pest control and seed inputs,

45、 through irrigation, mechanization and production technologies, to storage, processing, distribution and consumer Targets two key trends: the need to invest to increase productivity (includes supporting infrastructures e.g. seeds, technology, etc) the growth in volumes throughout the agricultural ch

46、ain (strategy more sophisticated than protein only seeks broader consumer patterns, also aspects like branding, obesity, etc) Not a commodity price play, but rather trends in food consumption www.sarasin.co.uk,25,Pictet Agriculture Fund,Fund established May 2009. NAV 126m (71 positions) Invests in l

47、isted companies operating in agribusiness value chain Provides investors with a high exposure to pure agriculture Favors companies operating in production, packaging, and supply, also in manufacture of agricultural equipment Also addresses resource efficiency (favors companies that produce more food

48、 with lower inputs) Targets 3 key segments: FARM INPUTS (e.g. Yara fertilizer), FARM PROFESSIONALIZATION (e.g. Tyson, Nutreco) SUPPLY CHAIN SERVICES (e.g. Brazil railroads, testing company Neogen) Invests not restricted to a specific geographical zone IN ECA: so far, investments in Agroton (Ukraine)

49、 and Linas Agro (Lithuania) ,26,Trigon Emerging Agri-Sector Fund,Launched May 2008/ fund domicile Estonia Fund size 15.7m (22 positions) Trigon Capital is leading CEE investment firm, manages USD 1 billion assets Trigon Emerging Agri-Sector Fund invests in listed food and agribusiness companies in e

50、merging markets with high growth potential and imbalance in supply and demand in agricultural produce focus on smaller companies May also invest into developed markets provided these companies have substantial business interests in emerging markets Fund combines Trigons operational farming experience with emerging market portfolio management expertise Investments so far mainly China (Asian Bamboo, Asian Citrus) , Russia (Chergizovo), Ukraine (Kernel), Turkey, Poland ,