Institutional investors have increased expo- sure to real assets over the last several years as the low return, low inflation backdrop has fuelled demand for alternative investments as a source of income. While most of the interest and flows have gone towards property and infrastructure investments, farmland investments have so far been underrepresented in institutional portfolios despite boasting equally, if not more, appealing characteristics.
The key characteristics investors consider when investing in real assets are their potential for return generation, low downside risk (to the extent that they are a store of value), sensitivity to inflaltion and diversification benefits. Evidence suggests that investors typically embark on their journey into real assets by investing in assets they are familiar with and spatially close to, such as core real estate in their domestic markets.
That strategy has been effective for investors but we believe that now is the time to consider go- ing beyond the core to seek a greater degree of diversification and to also benefit from a unique confluence of factors that should be very supportive for farmland assets going forward.
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