Financial advisers should consider recommending agribusiness assets to clients because they weather market volatility better, the Australian Agribusiness Group (AAG) said.
While the All Ordinaries dropped 8.51 per cent since the start of the month, the AAG Agri-Index which tracks the performance of 56 agribusinesses ranging from horticulture to fertilisers declined only half as much.
Planners should diversify their clients’ portfolios into agribusiness assets because they do not have credit problems and fare better during volatile periods, AAG managing director Marcus Elgin said.
“Investors are holding onto their agricultural stocks,” Elgin said.
“And for good reason, the crops in the ground do not care about subprime exposure and market jitters.
“They just keep growing provided it rains and so far this summer we have seen plenty of that.
“You get similar returns to other asset classes with lower volatility.”
The AAG Agri-Index has risen 17 per cent per year since its 2001 inception to 2007 compared with the All Ordinaries, which has gained 12 per cent on per annum in the same period.
Elgin said agribusinesses were stereotyped negatively due to some companies doing poorly, volatile commodity prices and weather forecasts.
