New Fund: OSK-UOB Agriculture Fund

With the world population slated to increase, particularly from the emerging markets like India and China, coupled with the increase in per capita income in the developing nations and an improvement in lifestyle, the demand for food, and in turn agricultural commodities, will see an upward rise. Moreover, with rising income, meat consumption is also expected to increase and therefore more grains, wheat and other soft commodities are needed to feed the poultry demand, thus also creating demand for agricultural commodities. 

However, despite the expected increase in demand, supply factors remain constrained due to land and water scarcity caused by urbanisation. Climate has also proven to be very unpredictable in the recent past, with increasing frequency of extreme weather events. This makes the planning and production of crops harder, especially when the supply of agricultural commodities is concentrated in a few countries.

This mismatch in demand and supply factors is expected to move prices of agricultural commodities upwards. OSK-UOB has therefore established this Fund so as to capitalise on this potential price increase in the agricultural commodities sector.

The Cultivating Fund

The OSK-UOB Agriculture Fund (AGRI) is an open-ended, growth fund which aims to achieve long term (5-7 years) capital appreciation through an over-the-counter derivative instrument in the form of a swap agreement that is linked to the agricultural commodities sector. 

The Fund seeks to achieve its investment objective by investing up to 100% of its Net Asset Value into fixed income instruments and up to 10% of its Net Asset Value as capital payment for exposure to an over-the-counter (OTC) derivative instrument in the form of a swap agreement with a counterparty that offers exposure to the performance of one of 3 indices, the Contag Beta Agriculture Excess Return Index-Beta Index, the Contag Beta Agriculture Excess Return Index-Alpha Index and the Contag Beta Agriculture Excess Return Index-Alpha Beta Index ("Contag Indices") that are linked to the agricultural commodities sector.

More on Contag Indices

The Contag Indices provide exposure to agricultural commodities by referencing exposure to certain commodity futures over time. They use the Contag contract selection methodology to select a maturity for each commodity futures on a monthly basis. Each of the Contag Indices invests in the same underlying commodities as included in the S&P GSCI™ Agriculture Official Close Index Excess Return (the “GSCI”) which currently as at 11 June 2011, by way of example, comprise exposure to the following underlying commodities but which may change in accordance with the GSCI’s own rules: sugar, cocoa, coffee, corn, cotton, Kansas wheat, soybeans and wheat. The workings of the Contag Indices are elaborated further in the Prospectus (page 18-20).

 

AGRI is suitable for investors who: 

(i)	seek investment opportunities in the agricultural commodities sector;
(ii)	seek capital growth;
(iii)	have a long term investment horizon; and
(iv)	have an appetite for risk to gain higher returns.

Source: OSK-UOB Investment Management

Click here to download prospectus

Should we invest in Commodities or Resources? (July 2011)‏

Unlike real estate, assets type such as commodities and resources investments tend to be highly volatile. This kind of assets classes is suitable for high risk takers. Knowing the characteristic of the assets classes is important to suit your investment objectives so that a correct investment decision was made. However, I noticed that many investors confused about Commodities and Resources, and they often lumped them as SAME. Is it true? Let's look at it separately (not together).

Commodities vs Resources?
Yes. Both is similar, yet there are some differences between them. First, let's talk about commodities. Commodities for me were comprised of metals such as copper, iron ore, silver, gold, platinum... Although many of us includes energy assets such as oil and gas into it, we can categorize it as an asset class which we can't consume with our mouth. Sometime, it was called hard commodities.

Meanwhile, Resources are soft commodities. They comprises agriculture products and food, etc sugar, corn, wheat, soybean, palm oil... These are closely linked with our food and beverages. After understanding the basic of these two assets, let's us examine the next question.

Should we invest in Commodities or Resources now?

In view of the current scenario, I prefer Resources rather than Commodities. Why? Demand for wheat, rice and other resources tends to be more sustainable. Even if the global economy is going to slow down, we still have to eat or consume as it was a necessity.

Other than that, bad weather (due to global warming?) and natural disaster (due to end-of-the world?) had disrupted the supply of resources. Although commodities such as coal mining in Australia was affected too, food do more harm to human being. Without adequate resources, people may trade commodities for resources!!! Don't you?

What if the current high price of commodities was driven up by speculation? Even though demand and supply play their role here, but speculation and traders tend to make profit from the game. By manipulating the demand-supply story, they're in to drive up the prices, making it more pricier rather than purely based on the fundamental.

After all these points highlighted, would you invest in Commodities or Resources?

New Fund: Avenue CARE Fund

On 18th March 2011, Avenue Invest Berhad, a member of the ECM Libra Group, launched the Avenue Canada Australia Resources Economies (CARE) Fund.

CARE fund seeks to achieve capital growth over a medium to long-term period by investing primarily in securities of companies in Australia and Canada. The fund may also invest in equities and equity-related securities, fixed income securities, structured products and money market instruments.

Why Australia and Canada?

Due to their resource-based economies, the manager views Australia and Canada as two of the best-positioned countries in the developed world to benefit from the rapid growth of emerging economies such as China. Both economies have emerged largely unscathed from 2008's global financial crisis and are now buoyed by the resurgence of their resource-based industries.

How to achieve the fund's objective?

Generally, the fund will invest at least 70% of its NAV in Australian and Canadian markets and the balance of 30% in other markets within the MSCI AC World Index which are deemed beneficiaries of resource-driven demand from emerging markets.

List of countries within the MSCI AC World Index as at June 2009.

The Fund may invest in companies across a broad range of industries and/or sectors including but not limited to banking and financial, materials and resources, consumer, health care, energy, industrial, real estate, telecommunications, utilities and infrastructure.

Source: Avenue Invest Berhad


Click here to read the prospectus.