FourWinds launches agriculture fund, plans another

LONDON Tue Apr 12, 2011 12:29pm EDT

LONDON (Reuters) - Commodities investor FourWinds Capital Management has launched a new agriculture fund and plans another later this year, targeting futures and physical assets respectively, its head of UK told Reuters on Tuesday.

Agricultural commodities are roaring with U.S. wheat up 68 percent in the past 12 months against a backdrop of soaring demand and supply constraints including a poor Black Sea harvest last year.

FourWinds has about $1 billion under management in water, timber, waste and other assets, and sees long-term opportunities in agriculture, despite having to close its previous such fund last year after it traded substantially below cash value.

"You're seeing growth in population and wealth which means people are eating more and eating better, which makes a good long-term play," said Chris Armitage, head of UK.

"Commodities and agriculture in particular are an interesting place."

The firm launched a new futures fund, Ceres II, last month and is targeting $100 million in funds by the end of the year. It has so far raised $20 million from two investors, a small institution and a large Nordic pension fund, he added.

The fund would use various arbitrages aiming to limit overall volatility, for example betting on soybean futures against soybean oil or pigs against corn, as well as bets on the weather and on a given commodity across different markets.

"You've got a series of diversified plays, lots of bets not particularly correlated to each other, individually volatile but not collectively," said Armitage, adding that the fund targeted about 8 percent volatility compared with 20 percent across equities, a lower risk profile which appealed to the firm's predominantly pension fund investors.

FourWinds wound up an exchange-traded agriculture fund last year after some shareholders demanded their cash at par after the thinly traded shares fell to a discount of 70-80 pence in the pound.

The new fund would mark to market on a monthly basis, said Armitage, meaning the value of its assets would be visible only once a month, rather than continually as in the previous fund.

The firm planned to launch an additional fund targeting physical agriculture assets possibly including farmland.

"We'll put together a team who really understand land. We aim to launch later this year," said Armitage, who said he set up the UK business of FourWinds from his front room five years ago when it had $20 million under management compared with 1 billion now.

(Reporting by Gerard Wynn; editing by Keiron Henderson)