World's rich nurture returns from forests and farms
Reuters | 4 October 2011
Global Head of Private Wealth Management at Deutsche Bank Pierre de Weck gestures during the Reuters Global Wealth Management Summit in Geneva October 4, 2011. (Photo: Reuters/Denis Balibouse)
By Martin de Sa'Pinto and Chris Vellacott
(Reuters) - A small but growing number of the world's wealthy are shoring up their portfolios with investments in forestry and farmland in an effort to take the sting from losses in more traditional assets as the financial crisis trundles on.
Though wealthy private banking clients have sought out the most liquid products since the 2008-9 financial crisis, when many were trapped in investments they could not sell, some see longer-term buys like forests and farms as potential safe havens.
It remains difficult to gain exposure to these assets, however.
"There is a demand for farmland but it is a niche demand," Deutsche Bank global head of private wealth management Pierre de Weck told the Reuters Wealth Management Summit on Tuesday.
"I happen to agree it's the right theme, but difficult to execute."
These investors see food security as a winning investment theme as developing nations, in particular China, beef up imports of crops such as corn, putting increasing strain on global food supplies.
Other bankers also said clients were beginning to explore investments in farmland. They included Pablo Garnica, Head of Private Banking EMEA at JP Morgan, although he described it as a "difficult" asset class.
But de Weck and other private bankers at the summit said that with interest rates now slipping below inflation in many countries, clients would have to add some risk to their investment portfolios just to preserve the value of their wealth.
Wegelin executive Ivan Adamovich said clients at Switzerland's oldest private bank were buying forests and land in Latin America, Canada and Africa.
"Normally people who buy that have a lot of money, they are looking to diversify. For them it's more important to keep the money they have," said Adamovich.
"With forests, land, you can be more secure except for risk of expropriation in extreme cases."
The downside is that it is challenging to identify well-priced farms or forests, and their management is a labor-intensive business, and wealthy families will generally need to make their buys through intermediaries.
But that could change as the asset class gains followers, said de Weck.
"I think we will see in the next couple of years companies built with private money going to IPO and you will be able to access land through public markets," he said.
(Reporting by Martin de Sa'Pinto; Editing by Hans-Juergen Peters)
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