TIGRS5 to tap global food, energy trends

Fri, Jun 17th 2011, 11:43 AM

Royal Fidelity is releasing its TIGRS5 (Total Index-Linked Global Returns Securities 5) fund on Monday, promising investors 100 percent principal protection and a minimum 10 percent fixed return over the product's five-year term.
The fifth in its TIGRS series, the closed-end, index-linked fund will allow Bahamian investors to participate in the global agriculture and energy industries, with potential returns of up to 60 percent.  Royal Fidelity mutual funds manager Joseph Euteneuer told this newspaper yesterday that the product, a hybrid that is neither a true fixed income nor equity security, should be a good fit for many Bahamian portfolios.
"While this hybrid product I think is probably good for just about any portfolio, it's particularly good for those portfolios, and particularly in The Bahamas, which are largely overweight in fixed income - and they tend to be."  He added that due to its hybrid nature, portfolios that are heavily equity-based could similarly benefit from the diversification the hybrid TIGRS5 would offer.
A key feature of the index-linked fund, beyond its hybrid characteristics, is the access to major players in the world's agribusiness and energy sectors local investors gain.  With a 60/40 agriculture/energy investment weighting, TIGRS5 will tap into the results of companies like Monsanto, Tyson Foods, Exxon Mobil and Halliburton through industry indices. Royal Fidelity is expecting a global trend towards increasing prices in both industries to continue and intensify, with increased demand for food itself contributing to greater demand for energy.
"The investment weighting--60 percent to agriculture and 40 percent to energy--reflects Royal Fidelity's belief that energy demand will naturally increase with an expansion in the agriculture sector and the continued growth in the global economy, largely driven by China, India and other developing markets," Euteneuer said.
"No matter what a farmer grows, enormous amounts of energy are required in the form of fertilizers, fuel for farming and processing machines, and for the transport of product to market.  But the very simple underlying fact is that more people in the world will require more food and more fuel."
Euteneuer cited UN projections for the global population to hit the seven billion mark in 2011, a year earlier than previous estimates suggested.  In the case of agriculture, he said supply would continue to be pressured by weather-related events, such as droughts and floods, while any biofuel production could mean a reduced supply of agricultural products to feed humans or animals.
According to Euteneuer, increasing income levels in developing countries also tends to increase demand for high-protein foods, like meat.  That in turn creates supply pressure for those protein products, the grain used to feed livestock, and the energy used to produce the grain.  According to a May 31, 2011 report by Oxfam, a leading UK charity that monitors global social issues, the price of staples such as corn may more than double in the next 20 years.
Social upheaval, supply-chain disruption and declining resources will continue to pressure energy supply, Euteneuer said.
The minimum subscription amount for the TIGRS5 fund is $5,000, with a two percent placement fee and a one percent per year management fee.  Investors holding TIGRS1, the first in the series, will be able to waive the investment fee if they choose to rollover into TIGRS5.  The offer opens Monday, June 20, and closes Friday, July 1.
 

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