Investment Strategies

UK Farmland Investors Harvest Impressive Returns

Wendy Spires Group Deputy Editor London 17 October 2011

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While it may lack the glamour of gold, UK farmland is proving to be an attractive “safe haven” asset class which can offer real outperformance amid today’s turbulent times, according to
Brooks Macdonald Funds.

The asset class has certainly got some convincing figures to back up this assertion: according to the Knight Frank Farmland Index, an acre of bare agricultural land is now worth some £6,000 ($9,437) – that’s a rise of 5 per cent year-over-year and close to double the price five years ago. This is in stark contrast to the fortunes of the FTSE 100, which has declined about 10 per cent in the past three months and which has grown just 6 per cent over the last ten years.

Behind this appreciation is a lack of farms for sale, and investors should also consider the relative lack of volatility farmland has displayed compared to other asset classes, such as equities, which have gyrated disturbingly in recent times. Brooks Macdonald additionally notes that farmland consistently tops the rankings in UK property investments, highlighting that over a three-year period the asset class has on a three-, five- and ten-year basis the asset class has delivered annual returns of 6.3 per cent, 12.0 per cent and 13.3 per cent respectively.

“Farmland is a non-correlative and low-risk asset which offers long-term performance. It’s suitable for investors looking for long-term growth and investment that’s not volatile. It’s a steady performer, a safe haven for money in troubled times. The long-term growth provided from investment in farmland can be illustrated by the performance of farmland over the last 10 years which has actually exceeded the performance of equities and commercial property. Its total return has been excellent,” said Martin Robinson, chairman of Brooks Macdonald Funds and director of its UK Agricultural Land Fund.

Brooks Macdonald is of course far from the only exponent of farmland as a solid investment theme for the future globally.  Supportive factors include exponential population growth and commensurate demand for food and animal feed, along with increasing use of biofuels.

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