Global X, the New York-based ETF company behind a number of funds offering exposure to various subsets of the global food industry, announced the latest expansion to its product lineup with the launch of the Global X Farming ETF (BARN). The product marks the 34th fund from the company and follows on the heels of several other food-focused ETFs from the company, including the Fertilizer/Potash ETF (NYSEARCA:SOIL), Food ETF (EATX) and Fishing Industry ETF (FISN). Add in the company’s Waste Management ETF (WSTE), and investors can now gain access to every aspect of the food cycle via exchange-traded products.
BARN will seek to replicate the Solactive Global Farming Index, a benchmark that is designed to reflect the performance of the global farming industry. The index is comprised of companies in both developed and emerging markets that are engaged in agriproduct or livestock operations, as well as the sale of farming products. The index employs a cap to ensure that no one company dominates the top 10 holdings and as a result, all of BARN’s top 10 holdings start off with a 4.75% weighting. In total the fund offers exposure to 50 companies and charges an expense ratio of 68 basis points, in line with many funds in the Commodity Producers ETFdb Category (the ETFdb Category average is 0.63%).
In terms of country exposure, the U.S. makes up roughly 32% of total assets, with the Asian market making up significant chunks as well. The next three countries represented are Singapore (15%), Malaysia (12%) and China (7%). This is followed by a host of developed markets including the U.K., Japan, Canada and The Netherlands, although these countries each make up less than 6% of total assets.
Appeal of BARN
Investment in this sector of the food production cycle could be appealing in the current environment for several reasons. First, with rising populations, more food will have to be produced in order to satisfy the increased demand. Some predict that as many as nine billion people will be on earth by the year 2050, making farming a vital resource for decades to come. Additionally, with rising incomes in many emerging markets, demand for higher quality diets (i.e., increased protein intake) is likely to surge as well; this trend will only further increase demand for agricultural products. “As the population in emerging economies increases their purchasing power and shifts dietary patterns, these nations have to increase food production yields,” said CEO of Global X Funds, Bruno del Ama. “Investors in BARN may stand to benefit from this continuing and global demand.”
Agribusiness ETF Options
Investing in agribusiness has become a popular play in recent months, thanks in large part to the trends highlighted above. One existing option is the Market Vectors Agribusiness ETF (NYSEARCA:MOO), which has more than $5 billion in AUM. Additionally, there is also a small-cap fund from Index IQ; CROP targets smaller agribusiness companies, whereas MOO and PAGG are dominated by large-cap stocks.
While there is some overlap between the new Global X ETF and the existing agribusiness funds, there are also some noteworthy differences. BARN makes a significantly larger allocation to Asian markets, as well as a larger overall allocation to emerging economies. Additionally, BARN features greater balances of exposure; the top 10 components make up about 48% of the fund, compared to about 62% for MOO and 59% for PAGG.
Direxion recently launched two 3x funds that offer investors levered exposure to the index that underlies MOO - the DAXglobal Agribusiness Index - allowing investors that embrace risk an option to play the agribusiness market that way.
Disclosure: No positions at time of writing.
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