CF Eclectica Agriculture Fund research update
Heather Ferguson | Thu 30 July 2015
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Demand for agricultural products is growing steadily as a result of global population growth and increasing food consumption in developing countries. George Lee, manager of the CF Eclectica Agriculture Fund, therefore remains optimistic in his long-term outlook for the agriculture sector.
The fund is a concentrated portfolio of 46 stocks allowing each holding to have a greater effect on the fund's performance, but this is a higher-risk strategy. Highlighted below are two of the fund's largest holdings.
Stocks in the spotlight - Syngenta/Monsanto
Agribusiness Syngenta focuses on crop protection and seeds, seeking to help farmers increase crop productivity by growing more from less. The stock currently accounts for 7% of the CF Eclectica Agriculture Fund - its largest holding.
In early 2014, the share price fell as the company was shunned by investors who felt with faltering crop prices and weak currencies in emerging markets, the outlook for the company was uninspiring. This left Syngenta's chemical and seed franchise undervalued, in George Lee's view.
The share price rebounded earlier this year on the news Monsanto, the world's largest seed company, was launching a take-over bid. Advances in technology provide farmers with the ability to use satellites to monitor their fields and Monsanto has invested heavily in the software required to allow them to buy products in reaction to the data they receive.
As Monsanto don't currently produce their own chemicals, Syngenta can reap the reward of a farmer utilising Monsanto's software to purchase pesticides. A take-over of Syngenta would therefore result in the integration of two well-aligned businesses. George Lee currently holds both companies, which together account for 13% of the fund. If the bid is successful, he plans to redeploy some of the proceeds into alternative seed and chemical companies as he is not permitted to hold more than 10% of the fund in a single holding.
George Lee has managed the CF Eclectica Agriculture Fund since its launch in June 2007. Over this time, it has underperformed the MSCI ACWI IMI/Agricultural Product Index by 62.6%* and the fund's official benchmark, the MSCI World Index, by 54.3%. Please remember past performance should not be seen as guide to future returns and the manager is able to use derivatives which can increase risk.
| Annual percentage growth | |||||
|---|---|---|---|---|---|
| July 10 -
July 11 |
July 11 -
July 12 |
July 12 -
July13 |
July 13 -
July 14 |
July 14 -
July 15 |
|
| MSCI World TR GBP | 25.38% | -2.79% | 23.37% | 10.68% | 11.81% |
| MSCI ACWI IMI/Agricultural Product | 27.1% | -6.46% | 13.92% | -0.07% | 6.93% |
| CF Eclectica Agriculture Fund | 32.67% | -11.6% | 11.47% | -4.57% | 8.27% |
Past performance is not a guide to future returns. Source Lipper IM* to 01/07/2015.
Our view on this fund
Like all funds investing in a niche area, the CF Eclectica Agriculture Fund's fortunes rely almost wholly on the performance of agriculture stocks in general. We feel the specialist nature of the fund makes it difficult for the manager to add significant value through stock selection or asset allocation. Although the past few years have been difficult for agriculture companies, it does not appear the manager has been able to shelter investors from share price falls and we would not expect the fund to significantly outperform either the MSCI ACWI IMI/Agricultural Product Index or the MSCI World Index over the long term.
Similar to many higher-risk specialist funds, the fund provides a way to access a niche area, other alternatives include ETFs. We believe exposure to niche markets should only account for a small portion of a portfolio. The fund does not currently feature on the Wealth 150 list of our favourite funds across the major sectors.
Find out more about this fund including how to invest
Please read the key features/key investor information document in addition to the information above.