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Alternatives
Farmland: Investing to feed a growing population
Investing in sustainable farmland is a fundamental way to benefit from the growing worldwide demand for resources while supporting environmentally friendly and socially responsible food production systems. We believe that considering nature, climate and people in our decision making may enhance investment performance, environmental outcomes and social benefits.
Nuveen is the #1 investor in farmland worldwide.1
Technology is needed to drive productivity
With the world’s population expanding by more than 67 million people per year, agricultural production will need to support more than 9.7 billion people by 2050.2 That means agricultural producers must double their output from 2010 levels with a limited land base.3 Investment in technology to drive more production is playing a critical role.
Why invest in farmland?
Investments in sustainably managed farmland may offer attractive financial returns while contributing to the health and development of the industry.
Portfolio diversification
Real assets have been powerful diversifiers, with low or negative correlations to traditional stocks and bonds — and to each other — over the last few decades. And farmland investments have shown substantially less annual volatility relative to traditional asset classes.
Beyond market diversification, allocations to low carbon, land-based asset classes may reduce the overall carbon intensity of a traditional portfolio. This provides a hedge against more carbon intensive allocations and reduces potential volatility in the low-carbon transition.
Inflation hedge
Real assets like farmland have provided long-term returns far outpacing the inflation rate. Rising inflation in part reflects increasing food prices and an ability to pay more for crops. In the near term, these higher prices may improve performance by increasing farm cash yields. Longer term, higher prices may also increase the capital appreciation component of return as they are incorporated into asset valuations. Together, both return components reinforce the positive correlation between inflation and farmland performance.
Additionally, we expect carbon-efficient production systems will benefit from growing demand and improved pricing. The low-carbon transition will increase demand for certified sustainable, carbon-efficient food, in turn supporting pricing for these products.
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Endnotes
1 Pensions & Investments, 03 Oct 2022. Rankings based total worldwide farmland assets under management for the 12 months ending 30 Jun 2022 as reported by each responding asset manager.
2 United Nations World Population Forecast, August 2023.
3 The Global Harvest Initiative 2019 GAP Report.
The views and opinions expressed are for informational and educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions, legal and regulatory developments, additional risks and uncertainties and may not come to pass. This material may contain “forward-looking” information that is not purely historical in nature.
Such information may include, among other things, projections, forecasts, estimates of market returns, and proposed or expected portfolio composition. Any changes to assumptions that may have been made in preparing this material could have a material impact on the information presented herein by way of example. Performance data shown represents past performance and does not predict or guarantee future results. Investing involves risk; principal loss is possible.
All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such. For term definitions and index descriptions, please access the glossary on nuveen.com. Please note, it is not possible to invest directly in an index.
Important information on risk
All investments carry a certain degree of risk and there is no assurance that an investment will provide positive performance over any period of time. Equity investing involves risk. Investments are also subject to political, currency and regulatory risks. Diversification is a technique to help reduce risk. There is no guarantee that diversification will protect against a loss of income. Debt or fixed income securities are subject to market risk, credit risk, interest rate risk, call risk, derivatives risk, dollar roll transaction risk, and income risk. As interest rates rise, bond prices fall. Foreign investments involve additional risks, including currency fluctuation, political and economic instability, lack of liquidity, and differing legal and accounting standards. These risks are magnified in emerging markets.
As an asset class, real assets are less developed, more illiquid, and less transparent compared to traditional asset classes. Investments will be subject to risks generally associated with the ownership of real estate-related assets and foreign investing, including changes in economic conditions, currency values, environmental risks, the cost of and ability to obtain insurance, and risks related to leasing of properties. Real estate investments are subject to various risks, including fluctuations in property values, higher expenses or lower income than expected, and potential environmental problems and liability. Please consider all risks carefully prior to investing in any particular strategy. A portfolio’s concentration in the real estate sector makes it subject to greater risk and volatility than other portfolios that are more diversified and its value may be substantially affected by economic events in the real estate industry. International investing involves risks, including risks related to foreign currency, limited liquidity particularly where the underlying asset comprises real estate, less government regulation in some jurisdictions, and the possibility of substantial volatility due to adverse political, economic or other developments. As an asset class, agricultural investments are less developed, more illiquid, and less transparent compared to traditional asset classes. Agricultural investments will be subject to risks generally associated with the ownership of real estate-related assets, including changes in economic conditions, environmental risks, the cost of and ability to obtain insurance, and risks related to leasing of properties.
Investors should be aware that alternative investments including private equity and private debt are speculative, subject to substantial risks including the risks associated with limited liquidity, the use of leverage, short sales and concentrated investments and may involve complex tax structures and investment strategies. Alternative investments may be illiquid, there may be no liquid secondary market or ready purchasers for such securities, they may not be required to provide periodic pricing or valuation information to investors, there may be delays in distributing tax information to investors, they are not subject to the same regulatory requirements as other types of pooled investment vehicles, and they may be subject to high fees and expenses, which will reduce profits. Alternative investments are not appropriate for all investors and should not constitute an entire investment program. Investors may lose all or substantially all of the capital invested. The historical returns achieved by alternative asset vehicles is not a prediction of future performance or a guarantee of future results, and there can be no assurance that comparable returns will be achieved by any strategy.
Responsible investing incorporates Environmental Social Governance (ESG) factors that may affect exposure to issuers, sectors, industries, limiting the type and number of investment opportunities available, which could result in excluding investments that perform well. ESG integration incorporates financially relevant ESG factors into investment research in support of portfolio management for actively managed strategies. Financial relevancy of ESG factors varies by asset class and investment strategy. Applicability of ESG factors may differ across investment strategies. ESG factors are among many factors considered in evaluating an investment decision, and unless otherwise stated in the relevant offering memorandum or prospectus, do not alter the investment guidelines, strategy or objectives.
Nuveen, LLC provides investment services through its investment specialists.
This information does not constitute investment research as defined under MiFID.
