I had wondered if financial turmoil has slowed the flow of fund money into farmland, like it has with commodities, but maybe not. At least one large hedge fund manager is doubling down.
Diggle plans to transfer ownership of his farmland into a holding company, in which outside investors can hold shares, he said. Vulpes, which currently manages about $200 million, will own and operate the company. After buying farms in Uruguay and Illinois, as well as a kiwi-and-avocado orchard in New Zealand, he plans to pour money into Africa and eastern Europe as global food prices soar.Of course, this may not signify much, because hedge funds are little more than a way to extract bloated fees from extremely rich people.
The value of farmland in the U.S. has probably gained 20 percent to 30 percent in the last two years, while Diggle’s investments in Uruguay may have risen 50 percent as sheep and cattle prices almost doubled in Latin America this year, he said.
Agriculture would be the “single most interest opportunity over the next 10 to 20 years,” Diggle said.
Vulpes favors investments in metals, energy and food, and “dislikes” government bonds, he said.
“Being long stuff in the ground is going to be a better place to be than holding pieces of paper,” Diggle said.
The firm’s Testudo Fund, which is heavily invested in precious metals and the mining industry, has gained 2.5 percent this year. The Russian Opportunities Fund has declined about 10 percent in the same period. [More]
Much has been made about hedge funds’ failure to keep up with the major stock market benchmarks this year. But 2011 is merely the latest disappointment in a string of misses that stretches back nine years, according to one analysis of the hedge fund industry.Maybe the continuation of hedge fund money into farmland is a bad sign, no? If nothing else, those farms will likely push the boundaries of cash rents if for no other reason than to pay their exorbitant fees. Try as I might, I can't work up much sympathy for the investors, however, which maybe underscores the growing social rift between that sliver of the very wealthy and even those of us doing pretty darn well. Be honest - aren't you rooting a teensy bit for the conniving hedge fund managers? Didn't you experience some titillating schadenfreude during the Madoff revelations?
Money invested in hedge funds since 2003 would have generated a return of 18% through November, according to data compiled by Hedge Fund Research. That puts it far behind the Standard & Poor’s 500-stock index, which has generated returns of 29% over that same period, once dividends are factored in, according to Simon Lack of SL Advisors. The hedge fund underperformance is even starker when placed next to a small basket of investment grade corporate bonds, as measured by the Dow Jones Corporate Bond Index. That benchmark has gained 77% since 2003.
Factor in hedge fund mangers’ customary 2% management fee and a 20% cut in profits, and the gap widens even more.
While disappointing, Mr. Lack says investors have no one but themselves to blame.
“The investors are all sophisticated wealthy institutions, not retail investors. So frankly, it’s a lot of sloppy analysis,” he said. [More]
Yeah - me too.
Regardless, I think it is fair to say it is really hard to find places to put money that will 1) still be there in 6 months, and 2) earn a positive return.