“Farmland is going to be one of the best investments of our time,” philanthropist George Soros claimed a couple of years ago.

He certainly wasn’t wrong. However, it could be said there is a lack of clarity when it comes to investing in agriculture today and opportunities are being missed in certain subsectors.

A group of leading scientists recently stressed the urgent need for investment into the agricultural sector to avoid widespread hunger, especially if this can be done sustainably. So how can the humble investor make substantial returns while investing into a worthy global cause?

There is still a wealth of opportunity in the sector that is being overlooked. Global farming remains a significantly undercapitalised sub-sector versus other agri sub-sectors, such as suppliers and packaging and distribution. To take this one step further and narrow down by country or region, it is often Emerging Markets that pose the greatest investment opportunities in this arena.

At Indxis, we have been investing in emerging markets by working closely with GAIA Capital Advisors, a Geneva-based fund manager and investment advisor spe­cialising in global natural resources and agriculture. We realised that investors were missing a trick and saw the need for a new index which would highlight the opportunities in this farm production sector.

Undoubtedly, there are potential instabilities in the global farming sector. These can be seen in the form of global warming and turbulent weather patterns, which may seem risky to some. Also arable land per capita is shrinking as the world’s population increases; the global population is predicted to double by 2050. However, as the price of food soars due to poor weather conditions, there is an increased demand from emerging markets and heightened popularity of crop-based bio-fuels. The potential returns are too rewarding to ignore. 

Over three years, our new index has an annualised return of 20.29%, outperforming such benchmarks as the MSCI EM small & mid cap by 8.56%, according to back-tested data. It has also outperformed agri index peers, including the Market Vectors Agribusiness ETF (MOO) and the Claymore Global Agriculture ETF (COW).

It is vital that investors are given exposure to farming companies with millions of hectares of agri land, market liquidity, high growth profiles, and low valuations. The overwhelming theme of the index is food production to “feed the world” and GAIA’s proprietary selection methodology does indeed consider such issues as food vs. fuel and sustainable and responsible development.

As one of the most successful investors of our time, Soros knew what he was talking about. This is a fast and growing investment space and people should seize the opportunity. Indices like the GAIA Global Farming Index can be an indispensable tool. Provided we fully understand global farming and its opportunities, we can profit from this hugely undercapitalised sector.