DSP BlackRock’s new fund offer (NFO), the World Agriculture Fund, is a fund of funds (FoF) scheme. The scheme will invest in the BlackRock Global Fund-World Agriculture Fund (BGF-WAF), that invests in equities of agricultural companies globally.
The BGF-WAF is benchmarked against Luxembourg’s DAX Global Agribusiness Index. The scheme has performed in line with the benchmark in the past year (as on August 31) with returns of 20.5 per cent, whereas its benchmark has gone up 21 per cent. In the past six months, the fund’s returns have fallen 7.5 per cent and its benchmark was down 6.6 per cent.
S Naganath, president and chief investment officer of DSP BlackRock, said, "Agriculture is a sector represented globally, which has sound fundamentals over the long term, given the rising imbalance between food demand and supply. We believe agriculture is an investment opportunity, with the potential for growth in the long-term."
There are two more international feeder funds in India that invest in shares of agri-commodities' companies abroad. Deutsche Asset Management, the mutual fund arm of Deutsche Bank, had a fund — DWS Global Agribusiness Offshore —launched in April 2010. This returned 2.49 per cent in the past year. Birla Sun Life Asset Management Company's Global Agri Fund has returned a negative 9.34 per cent. In comparison with equities, it has done better in recent times. The Sensex in the past year dipped 19 per cent.
The charges for international feeder funds are no different from what domestic fund investors would pay. The overall asset management charges are capped at 2.25 per cent. The fund invests in agricultural science companies, fertilisers, agricultural equipment, agribusiness, food processors, land & farming, forestry and allied sectors.
For investors wanting to take advantage of the agri-commodities story, this fund is a good opportunity. The international trend of investing in scrips such as Monsanto, Potash Corp, Deere, Archer-Daniels-Midland, Wilmar International etc. is an added attraction.
The move seems timely, as analysts feel prospects for the agriculture sector look bright. Naveen Mathur, associate director (commodities) at Angel Broking, says the agri-commodities space looks promising, as prices are likely to rise.
The disadvantage of investing in a global feeder fund is that it is treated as a debt fund and you have to pay capital gains tax. The short-term capital gains tax (less than 12 months) is 30 per cent. The long-term capital gains tax (more than 12 months) is lower, at 10 per cent without indexation or 20 per cent post it.
Hemant Rustagi, CEO, Wiseinvest Advisors, says a fund such as this is meant for those with a large portfolio and a capacity to bear risks and the volatility associated.
He says the exposure to thematic funds should be 5-10 per cent. And, to invest in these requires a more active management by the investor.
Besides the usual risk of investing in equities, there is a foreign exchange risk as well on investing in an international feeder fund.
