U.S. Markets closed

Market Turmoil Could Be A Boon For Some Alternative Assets

Renato Capelj

Global markets are historically volatile right now. As the COVID-19 coronavirus continues to spread, assets across the investment spectrum are finding themselves fluctuating wildly to account for what almost certainly will be a global recession.

In this time of uncertainty, investors are searching for safety. Cash, as always, is the go-to asset in times like these. But there are other investments—alternative investments, specifically—that could be in play. One such asset could be farmland.

Traditionally, U.S. farmland values have been well-supported by earnings, growing food demand, and low-interest rates. During the 2008 downturn, strong farm earnings buoyed farmland markets, dampening the effects of falling real estate values.

According to the NCRIEF Farmland Property Index, between Q4 2007 and Q1 2010, farmland continued to produce positive returns every quarter. In the fourth quarter of 2008 specifically, the worst quarter for U.S. stocks during the financial crisis, farmland returned 7.33%.

In fact, since 1991, farmland has only had one negative quarter, Q1 2001, where it returned -0.01%, according to the index.

Cognizant of the farm sector’s relatively low-correlation with financial markets and other real assets, FarmTogether, an online platform that allows accredited investors to invest in farmland, developed an alternative investment solution that exposes risk-averse accredited investors to farm sector assets.

Properties on the platform are selected according to the quality of parcels, and investors can own fractional shares, entitling them to returns from land appreciation and operating income. Investors are also not subject to out-of-pocket expenses like taxes and rent leases. Instead, farmers pay all input costs and FarmTogether addresses property taxes, insurance, and other landowner expenses.

In September, FarmTogether announced the introduction of a secondary market in a move to democratize the farming industry and address investors' demand for liquidity. The market offers one-year liquidity windows after the initial investment, with subsequent liquidity windows occurring yearly every month and prices adjusted every five days.

“Farmland is an excellent addition to any investment portfolio,” said Artem Milincuk, founder of FarmTogether. “It is inflation-resistant and contra-cyclical to many conventional equity investments.”

To learn more about investing in farmland, navigate to farmtogether.com/how-it-works.

Image courtesy of Pixabay.

See more from Benzinga

© 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.