Published on February 24, 2014
Investing Into Mankind’s Primal Need Diversifying Into Agriculture to Safeguard and Build Wealth E/W: Info@liquid-investments.com | www.liquid-unvestments.com UK OFFICE: 9th Floor, 1 Knightsbridge Green, London, SW1X 7QA BRAZIL OFFICE: Av Santos Dumont 2828, Sala 1501, Aldeota, Fortaleza, 60150 - 162 UK+44 (0) 20 7084 7421 | USA +1 (347) 647 0127 | BRAZIL +55 (85) 3224 6659
About Liquid Investments Founded in 2006 Alternative Investment specialists in Emerging Markets Focus: Helping clients to diversify away from the uncertain financial markets in the ‘West’ and into Agriculture Commodities in Brazil Brazil 1
Experienced Management A Senior Management Team comprising Investment Professionals with long standing Markets Experience Global work experience – Europe, CIS, M-East, Far-East raising several Hundred Million dollars Experience: Deutsche Bank, Santander, Arthur Andersen, Aon, Spectron Group. In Banking, Investments, HNW Advisory, Tax Advisory, Commodities Trading 2
Know Your Client We ask our clients what they want, and marry that to what they NEED We believe that it is ESSENTIAL that clients identify and plan for their future as there are some very clear threats to their plans that must be understood and navigated 3
What are YOUR Goals? Retirement - lifestyle, retirement date, annuity Education - children or grandchildren’s Aspirations – travel, beach house, new car etc Legacy or inheritance Plan for medical costs that may be encountered in later life 4
Monetize YOUR Goals A BASIC retirement for an average American couple costs $1 million Average medical costs for a couple in the US - $220,000 Education costs – per child up to $520,000 until age 18 and a “normal" 4 year degree costs $100,000 (Harvard costs $260,000) Taking a holiday once a year for 15 years in retirement mounts up and costs on average $150,000 5
Goals – Paying For It Average US couple will need $1 million for retirement Assuming a conservative 4-5% annual draw-down (preinflation, emergencies) Investing in a tax-free muni bond portfolio, drawing down $40,000 annually… There is a 72% chance nest egg will be exhausted before you die 6
The Problems – Big Picture Fertility rates are slowing, longevity is increasing Between 2013 and 2050 the number of people globally 65 and older will TRIPLE to 1.5 billion, one-sixth of the world’s population Inspite of people living longer, average retirement age throughout the 20th Century remained static at 64 Apart from (adverse) demographics, there are high levels of debt in developed economies, slowing rates of growth in emerging markets… 7
Old Age Dependency Ratio Old-Age Support Ratio: Number of People of Working Age (20-64) Per Person of Pension Age (65+) South Africa India Turkey Indonesia Brazil Mexico China Chile Korea Ireland Russian Federation United States Canada Australia Czech Republic Netherlands OECD United Kingdom Switzerland Denmark Spain Japan Source: OECD (2011) 12.5 11.2 9.9 9.8 8.9 8.9 7.9 6.8 2.5 6.3 1.5 5.6 2.2 4.9 2.4 4.7 2.6 4.6 2.1 4.5 2.3 4.4 1.9 4.2 2.1 4.2 2.1 3.7 2.4 3.7 2.0 3.7 2.3 3.7 1.5 2.8 1.2 0 2 4 6 8 6.1 4.5 3.2 3.1 2.6 2.5 2.4 2008 2050 10 12 14 16 18 20 8
Stay Healthy A recent estimate* states $220,000 will be spent by the average 65-year old couple for healthcare expenses throughout retirement The Society of Actuaries estimate a couple retiring at 55 and living to 85 will spend $744,800 on healthcare *Fidelity Investments 9
No Longer Fit For Purpose David Lloyd George (Chancellor of the Exchequer, 1908-15) He was the driver for a well intentioned social experiment which many of us are paying for today – state funded pensions. While his original system was workable, our modern day system has not adapted and simply is not affordable 10
Work Hard The US government estimates that middle-income parents of infants born today will spend $242,000 to raise their child to the age of 18…but this excludes college fees, which can be up to an additional $520,000…before university fees are added, a further $100,000-260,000 = up to $1 million per child 11
Adding Up The Cost Retirement Children Extra $1 million – Pension $242,000 – Living Expenses $150,000 - Holidays $220,000 – Medical Expenses $520,000 + $260,000 College + University $1.37 million $1.02 million $150,000 = $2.54 million 12
Investment Returns Set to Slide 8% 7% 6% 5% 4% 3% 2% 1% 0% World since 1950 World since 1980 World Historical high returns Source: Credit Suisse Global Investment Returns Yearbook 2013 USA Japan UK Europe Emerging markets Prospective lower returns Equities Bonds 13
Debt Perspective 14
(The Need For) Diversification Modern Portfolio Theory (MPT) is used by all fundamentally driven investors A risk management process whereby different types of investments are blended Result – A collective performance generating higher returns with lower risk than an individual investment 15
Diversification - Video Asset Class Commodities Currency Products Geopolitics 16
MPT Equates To More Choice 17 17
Liquid Investment Theory (LIT) Our refinement of ‘Modern Portfolio Theory’ Additional layers of diversification Uncorrelated investment behavior to mainstream assets 18
Liquid Investment Theory (LIT) Provides additional layers of diversification Asset Class: a finite resource Commodities: not correlated with other assets Currency: independent Products: agricultural, consumer, industrial, pharmaceutical sectors Geopolitics: 5th largest global economy by 2015, stable democracy 19
Investment Focus on Agriculture Is there more primal urge for humans than to SURVIVE? They have to feed themselves and their families! 20
Why Agriculture? Asset class generating uncorrelated returns compared to other investments Value to rise due to a widening supply-demand imbalance 21
Farmland World-Wide Is Disappearing UN estimate 12 million ha. being lost on annual basis worldwide Equivalent to all farmland in California disappearing every 3-years The loss is permanent and due to deforestation, chemical usage, livestock overgrazing and the impact of global warming 22
Its Getting Crowded Life Expectancy (years) Life expectancy is rising 2011 World 52.58 70.54 69.77 75.04 Brazil 54.69 73.35 China Protein rich diets throughout emerging markets 1960 US 7.2 billion people in 2013 to 10 billion in 2050 43.47 75.04 India 41.38 65.96 Source: IMF 2012 23
Population Forecast 16 World Population, 1950-2100 14 Africa 10 Billion 12 Asia 8 Europe 6 Latin America and the Caribbean 4 Northern America 2 Oceania 0 1950 1980 2013 2050 2100 Source: Population Division of the Department of Economic and Social Affairs of the United Nations Secretariat (2013) 24
A Primal Need Agricultural Land Price Appreciation in Brazil, 2010-2013 70% expansion in global food production will be required (FAO) 120 100 Other factors driving price increases include rising costs of fertilizers and energy, the impact of climate change and the rising biofuel demand 80 (%) Forecasted 60% real increase in food pricing 99.6 72.6 71.9 63.0 70.6 62.1 60 40 20 0 Source: Bank of America Merrill Lynch 25
Illustrious Investors… “… get a Lamborghini dealership in Oklahoma or in Nebraska because farmers are going to be driving the Lamborghinis” Jim Rogers Other investors George Soros, key pension institutions such as TIAACREF, firms like BlackRock, Morgan Stanley and large and influential sovereign wealth funds such as the China Investment Corporation and Temasek (Singapore) 26
Recent Farmland Purchases in Brazil Investor Origin Area, ha. Use of Farmland Cresud Argentina 175,000 Cattle, Crops, Sugarcane El Tejar Argentina 220,000 Cereals, Oilseeds Chongqing Grain Group China 200,000 Soybean Pengxin Group China 200,000 Cotton, Soybean Louis Dreyfus France 250,000 Sugarcane Aquila Germany 250,000 Cattle, Sugar Shree Renuka Sugars India 133,000 Sugarcane Adecoagro US 165,000 Cattle, Coffee, Grains, Soybean, Sugarcane TIAA-CREF Retirement Equity Fund US 424,000 Soybean, Sugarcane Tiba Agro US 320,000 n/a 27
Best of the BRICs More to offer than guns and oil unlike RUSSIA No ethnic/religious tensions or hostile neighbors unlike INDIA A democracy unlike CHINA BRAZIL - Largest reserves of freshwater globally, 329 million ha. of rich arable land and the largest tropical forests responsible for generating 20% of the world’s oxygen, set to be the worlds number one producer of food by 2020. 28
Why Brazil (1) % of World Production From Brazil 0 10 20 30 40 Orange Juice 50 60 57 Coffee 40 Oranges 35 Soybean… 28 Ethanol 25 Sugar 24 Cattle 18 Poultry 16 Beef&Veal 16 Iron Ore 14 Bauxite 14 Cotton 8 Milk Crude Oil Source: Santander 6 3 29
Why Brazil (2) Global FDI Ranking, 2012 5th largest consumer market by 2020 4th largest global recipient of FDI in 2012 FX reserves equivalent to the rest of the continent combined US$ Billion 6th largest global economy, 5th largest by 2015 147 USA China Hong Kong Brazil UK France Singapore Australia Canada Russia Ireland India Chile Luxembourg Belgium 120 73 65 63 59 54 49 47 44 40 27 26 23 19 0 50 100 150 200 Source: United Nations Conference on Trade and Development (UNCTAD) 30
The Road to Brazil Diversification Modern Portfolio Theory Liquid Investment Theory Agriculture Brazil Asset Security and Profit Potential 31
A Reversion to Mean 32
The Humble Coconut 2 reasons it is of particular interest to us: 1. 2. All parts can be processes Current supply-demand imbalance Fastest growing markets: Coconut Water Activated Carbon Coconut Oil Biofuels 33
Coconuts in Brazil Coconut Yield by Country (‘000 hg/ha.) 120 Brazil 100 India Indonesia Philippines 80 Sri Lanka Thailand 60 40 High levels of agrarian R&D in Brazil 20 0 Highest yielding coconut producer globally 34
Coconut Plantation Video
The Organic Potential Global Organic Food & Beverage market size forecast at $105 billion in 2015, a doubling in 5 years Organics already account for 4% of total US food sales and forecast to grow by 14% between 2013-18 36
Coconut Plantation – Key Financials Return on Investments between 1140% Projected IRR to yield up to 18% over twenty years Option to purchase immediate earnings stream at Fazenda Santa Rita 37
The Attraction of Neem ‘The Tree of the 21st Century’ Indigenous to Asia Effective natural bio-pesticide A non-synthetic method of disease and bacteria suppression 38
Neem Plantation Video
Neem – A Weapon for the Post-antibiotic Era A wholesale exodus out of antibiotic development by Big Pharma. over the past 15 years Antibacterial New Drug Approvals Number of Antibacterial New Drug Approvals 18 16 16 14 14 12 10 10 8 7 6 4 4 2 2 0 1983-1987 1988-1992 1993-1997 1998-2002 2003-2007 2008-2012 Source: FDA's Center for Drug Evaluation and Research (CDER) 40
Neem Plantation – Key Financials Return on Investments between 11-44% Projected IRR to yield up to 20% over twenty years Crop care included for the first five years 41
The Importance of Asset Choice Travelling from the US to China in 48 hours? However hard you tried on your bicycle, you are just not going to get there. The only guaranteed way is by jet plane. The same applies to investments – make sure you choose the right assets to get the job done 42
Thank You For Your Attention E/W: Info@liquid-investments.com | www.liquid-unvestments.com UK OFFICE: 9th Floor, 1 Knightsbridge Green, London, SW1X 7QA BRAZIL OFFICE: Av Santos Dumont 2828, Sala 1501, Aldeota, Fortaleza, 60150 - 162 UK+44 (0) 20 7084 7421 | USA +1 (347) 647 0127 | BRAZIL +55 (85) 3224 6659 43
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