Farming, food and how the journey of food to the table fits with ideas around sustainability is an important issue. Global supply chains have been disrupted by the pandemic. Modern technology is opening up new avenues. We talk to an investment house with an Asian and European footprint about developments.
Before the Industrial Revolution in the West, there was an Agricultural Revolution – building a launch-pad for what followed. Fast-forward to the early 21st Century and worries about global warming, resource pressures, and farming is a hot area again.
Processes such as cultivated meat, hydroponics (growing plants without soil), converting forms of waste into energy and food, and using drones to track soil states are just some of the forces at work. And in many cases they’re helping tackle fears over excess carbon emissions and soil loss. That, at least, is the hope.
Step forward Simon Hopkins, chief executive of Milltrust International Group – a firm with offices in Singapore and London. He is also chairman of Milltrust Agricultural Investments Ltd and CEO of Milltrust Ventures Pte Ltd (Singapore). An investment industry figure for several decades, Hopkins, now based in Singapore, comes from the UK’s Midlands where he was raised on a farm, giving him a hands-on insight into what food production is all about. Milltrust’s three main areas of investment and work are agri-science, healthcare, and climate impact. Milltrust was founded in 2010.
After some difficult times for emerging markets and commodities, for example, agriculture and related sectors are holding a big promise, he told this news service in a recent interview.
“To survive and thrive in this business you have to be deeply differentiated. We have got a bit of a lead as we have been in this space for more than 10 years,” he said. Milltrust's clients come mainly from the family offices and high net worth individual cohort.
At a time when everyone seems to be throwing the word “sustainability” into conversations like confetti, Hopkins argues that his business' track record and focus on specific areas carries credibility. The group manages $500 million in emerging markets equities and about $100 million in venture.
(This news service has a new programme, its Wealth For Good Awards, designed to highlight the work wealth managers are doing to drive change around the environment, society and governance. To find out more about the awards, click on this link. Submissions close on 4 February. Winners, finalists and commended entries will be celebrated in May this year.)
The Milltrust cluster of businesses come in various forms. For example, there is the Milltrust Global Wealth Solutions arm, which was started in July 2012. Since then it has delivered steady risk-adjusted annualised returns, Hopkins said. These annualised returns vary depending on the client’s risk appetite against three portfolio targets of between 3 to 8 per cent, 8 to 15 per cent and 15 per cent and more.
When Milltrust was launched a decade ago, and Hopkins had moved himself and his family to Singapore, he looked for niche areas where he could make a difference with a focus on sustainability. For instance, he launched the firm’s emerging market funds. “We had a screening process [for ESG] that was unusual at the time. We were also scoping out opportunities to deploy capital into the commodity super-cycle,” he said.
“I had been looking to invest in agriculture for some time,” Hopkins continued.
After the global financial crisis of 2008, it seemed that the agriculture sector was due to fare well, although progress for a few years was not easy.
“We got a local pension fund that put $100 million into investments into agriculture in New Zealand and Australia,” Hopkins said. The approach of this agriculture investment was using leases of land to farmers to generate a regular stream of income of the sort that pension funds liked.
“Unfortunately, the backdrop for agriculture markets became dismal….the commodity cycle changed and emerging markets had a bad time,” Hopkins said. The strong US dollar was an issue, he said. However, rising price growth recently suggests that difficult days are ending. Farmland prices have risen “massively,” he said. “All my assets have repriced.”
Prices have certainly risen in some farmland markets. A report in 2020 by Savills found that in domestic currency terms, Australia and New Zealand witnessed the largest appreciation in farmland value growth of 14 per cent and 13 per cent in 2019, respectively. Over the 20 years to 2019, the global picture is mixed, but broadly showing a rise in most regions of the world.
“We have just sold our farmland mandates in Australia and New Zealand. A recent significant uplift in agricultural land prices plus a return to the commodity super cycle and La Niña [Pacific ocean current system] are driving prices inexorably upwards meaning that farmers are having a bumper year. We remain committed to invest in agriculture but principally with a focus on agri-science and technological advances in food chain security,” Hopkins said.
Down on the farm
Milltrust works with the UK-based Roslin Technologies group, renowned for developments such as genetic modification, as in “Dolly” the sheep. Hopkins enthused about the growth of cultivated meats and how important this is at a time when demand for animal meat in Asia is skyrocketing. Another example he gave of Roslin’s work was in sustainable food practices was from Singapore, where insect grubs stemming from the waste of palm oil are bred for fishmeal – a healthy alternative to soy beans which have been used as fishmeal.
“A lot of science is coming out of the UK; we have a wonderful relationship with Southeast Asia. We are helping the circular economy,” he said.
As far as animal husbandry is concerned, Milltrust has created a vertically integrated business in New Zealand, taking a different approach to rearing cattle so that instead of slaughtering a number of young males because dairy is preferred, more are raised as beef cattle.
Hopkins argued that one driver of agricultural innovation is that China needs to decarbonise its economy.
“Milltrust has been an early pioneer in impact and sustainable investing, with a key focus on the UN Sustainable Development Goals. Milltrust seeks to maximise its contribution to these goals by identifying and investing in highly impactful companies to ensure we leave a better planet for future generations,” Hopkins said. He said that his business was instrumental in drafting the Animal Welfare section of the OECD Farmland Investment Guidelines and has been an active participant in the International Sustainability Unit (ISU), formally an initiative of HRH Prince of Wales.
The organisation runs a number of funds: Climate Impact Asia Fund, Global Emerging Markets Fund, and British Innovation Fund. For example, the climate fund is a long-only direct public equity impact investment strategy investing in Asia-listed companies which enable the adaptation to, or mitigation of, climate change, and the transition to the low carbon economy. Milltrust said this strategy has produced annualised returns of more than 24 per cent since its inception in January 2020. The fund also donates up to 40 per cent of its fees to WWF’s conservation programmes in Asia.
In the case of the Global Emerging Markets Fund, it is a public equity portfolio of high conviction ESG investments hand-picked by country-specialist investment teams. That strategy has chalked up annualised gains of more than 10 per cent since its inception in July 2012, beating the MSCI Emerging Markets Index. As for the British Innovation Fund, backed by UK local authority pension funds, it targets an internal rate of return of 20 per cent. Examples of investments include Vaccitech, a platform licenced from Oxford University’s Jenner Institute for vaccine research. The company was valued at $68 million at the time of Milltrust’s first investment and its valuation grew by 8.6 times at peak shortly after listing on NASDAQ in April 2021, Milltrust said.