CityWire | 30 April 2010
By Atholl Simpson
Record harvests and increasing demand make the agriculture and water sectors compelling investments currently, according to Thames River Capital’s Kristof Bulkai.
The London-based fund manager runs the firm’s Water and Agriculture fund, which was launched in March 2009, alongside colleague Hugo Rogers. It invests mainly in US and Europe based companies and following record harvests for corn and meat producers last year Bulkai believes the market will see good growth over the next twelve months. ‘This is the type of market that is perfect for our fund,’ he said. ‘We need to monitor everything, from field to fork.’ The $35 million absolute return fund’s main exposure is currently protein manufacturers as well as salmon and fowl farmers, the latter offering potential for good margins this year after a drop in the number of rival farms, according to Bulkai. ‘In order to feed a growing population with an increasing standard of living, the price of water and food must continue to rise. We use huge amounts of water everyday without even realising it.’ Bulkai said he was ‘very excited’ about the prospects for positive returns from the water infrastructure sector as many large urban areas, such as London, are looking to replace faulty and leaking water distribution systems. Although he considers the emerging markets as promising areas for future long term investment, he thinks current money tightening regulations have limited their short term appeal. The sector specialist fund invests heavily in food production, which Bulkai says is very much related to the demand for water, and when questioned over the fund’s approach to disputed genetically modified (GM) crops, the fund manager said the issue was ‘not really an ethical concern’ for his fund. ‘In the long term, I think the problem of feeding the world will have to come from some sort of genetically modified food.’ Over 70% of the world’s freshwater goes towards agriculture and unlike other commodities or products, there is no substitute for the consumption of food and water. ‘The demand for water is increasing but the supply, due to the lack of appreciation for this resource, is decreasing.’ In its first year, the Thames River Water & Agriculture absolute return fund has returned 15%, compared to the risk free return of 0.5% from the LIBOR USD 3 months benchmark.
