Capital Innovations Agribusiness Fund Up 31% YTD, Opens To Outside Investors

Sep 26 2011 | 9:06am ET

Michael Underhill, CIO of Wisconsin-based Capital Innovations, says investors today are looking for “something that’s not going to be derailed by the euro, or political policy or…some kind of hedge fund trader taking some action in the markets” and he’s got the answer: Agribusiness.

CI launched the Global Agribusiness Investment Fund last August with partner capital and Underhill says it returned 14% this past August and a whopping 32% YTD. They’re now opening the doors to outside investors and Underhill says they expect to be at $12 million by the end of the month and $100 million by year’s end.

“We started this strategy to help people capitalize on the stresses in the food supply chain and in meeting the world’s global food supply,” Underhill told FINalternatives, “But we also set it up because it’s publicly traded securities and so there’s no private equity lockup, it’s not a private fund, it’s a separately managed account. We’re going to be rolling out a mutual fund next year so that people can invest in something like this that capitalizes on agricultural trends.”

Those trends include a growing world population, increasing demand for agricultural products, increased protein intake in developing markets, pressure on food supplies due to climate change and a growing scarcity of arable land.

All of these factors, says Underhill, make agribusiness—the business of feeding the world—a good place to invest money.

The agribusiness universe is diverse, covering materials, consumer staples and industrials—or stocks like Archer Daniels Midland, Potash, Monsanto and Associated British Food. Underhill says it’s also diverse geographically—the Global Agribusiness Investment Fund is invested in a number of countries, including the U.S., Singapore, Brazil, Canada, Chile and China, just to name a few.

Underhill says the firm has an in-depth investment process that begins with an economic analysis to determine the regions and countries generating favorable GDP figures, then looks at industrial sectors within those countries, then demographic trends, then individual stocks. He says their analysis has led them to consider not just to the BRIC countries (Brazil, Russia, India and China) but to what Goldman Sachs has dubbed the N-11 or Next Eleven countries; a list which includes Bangladesh, Iran, Egypt and Mexico.

Minimum investment for the fund is $1 million, and fees are 1.5% and 20%—the 20% being a performance fee based on the S&P Agribusiness Index.

As for the current investment climate, Underhill says it’s actually working for them:

“Today we’re bargain hunting, we picked up two stocks. It’s a great opportunity if you have cash right now and conviction and you follow your institutional process, you can make a lot of money in this market. So while everyone is running for the exits today—we’re buying.”


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