Portfolio Factors
Agriculture and farmland have attractive fundamentals for astute investors providing strong risk adjusted returns, low volatility, diversification and a hedge against inflation.
In Australia, agriculture compares favourably with more mainstream asset classes on a risk adjusted returns basis. Data analysed by AAG (AAGIM’s sister company) and presented in the paper titled “Does agriculture improve portfolio performance?” illustrates the benefits of adding agriculture to investment portfolios.
The research paper demonstrates that:
- The top 25% of agriculture can produce returns almost as good as Australian shares.
- Returns from top agriculture are substantially less volatile than Australian shares, listed property and international shares.
- Agriculture is not correlated to other asset classes and provides a strong inflation hedge.
- The Top 25% segment of Australian agriculture is a sensible choice when considering diversification, stability of returns or absolute returns for a portfolio.
- The addition of agriculture to a portfolio can substantially reduce volatility for limited (if any) reduction in overall returns.
The research paper can be downloaded by clicking here.