This month Simon Hopkins joined Pyers Griffith in Latin America’s Chile, Peru, Paraguay and Argentina to gauge the investment climate first hand and visit a number of investment opportunities for MAI, our Emerging Markets farmland fund.

Alexander Kalis, Partner and Investment Director at Milltrust also recently spent time in Singapore, where upcoming Milltrust India Fund and Milltrust ASEAN Fund are represented. The visit coincided with the Goldman Sachs Annual Asian Hedge Fund Symposium which featured a keynote speech by Singapore Deputy Prime Minister, Minister of Finance, and Chairman of the Monetary Authority of Singapore, Tharman Shanmugaratnam. He shared fascinating insights on China and the region.

First stop Chile, which like South Africa, is perceived as a principally resource-focused economy with a progressive, mandatory pension regime. This however is a country which has gone through a significant boom in recent years and many of the companies in the country have expanded aggressively into other neighbouring Latam countries with considerable success. From a PE perspective there is sense that Chile is a seller’s market however, with dozens of PE firms clamouring for every transaction.

The Andes region, as well as operating as a new free trade zone, has become a hot destination for investors, and Peru is enjoying a similar boom that Chile underwent a decade or more ago.?We met with politicians and business leaders, and then visited an awe inspiring irrigation project led by one of Brazil’s largest conglomerates which brings water via a tunnel through the Andes to the desert landscape of Northern Peru, creating thriving sugar cane plantations and rice cultivation. We are exploring the opportunity to develop one of these turn-key properties.

In Paraguay, we concentrated on Grab Chaco, one of the last great land masses yet to be systematically cultivated. The environmental concerns of naturalists have been largely contained by legislation that precludes the development of any more that 50 percent of a farm’s land mass. So farmers become by definition stewards of the biome. This is evident when flying into the region where agricultural lots are divided into sizable tracts of bush and wooded areas.

Chaco is a harsh, historically impenetrable area but the soil and rainfall are such that farming is eminently feasible. Indeed, American and German groups, as well as the local Mennonite community, a Christian Anabaptist sect, are already farming responsibly and successfully in the region. Chaco will form one of the building blocks of our EM land opportunities platform “MAI”, as land prices are a fraction of the cost of the similarly fertile plains of the Matto Grosso, which neighbour Chaco.

We also spent some time in Singapore, where upcoming Milltrust India Fund and Milltrust ASEAN Fund are represented. The visit coincided with the Goldman Sachs Annual Asian Hedge Fund Symposium which featured a keynote speech by Singapore Deputy Prime Minister, Minister of Finance, and Chairman of the Monetary Authority of Singapore, Tharman Shanmugaratnam. He shared fascinating insights on China and the region.

In his talk, Shanmugaratnam highlighted that China was now at an important inflection point with a key leadership change which will have far greater significance on the world stage than the Obama (re)election. The decline of the workforce in China over the next couple of years is one of the major challenges facing the country and it means that the next phase of economic development must be driven by more efficient methods of production, as well as from changes in the financial sector.??At the same time, another major turning point for the country will be its shared global leadership role on the international stage, as the single dominance of the US recedes. He exuded confidence that Xi Jinping, a reformist, would meet the new challenges facing the country and implement the necessary reforms to protect its growth trajectory.

We also gained some good insight on India through our meetings with UTI, the 5th largest Asset Management firm in India and manager of the Milltrust India Fund.??After a 2 year hiatus, the government has finally taken some strong measures and announced some capital market friendly reforms that have alleviated some of the latest market concerns. These reforms included:

Allowing 49% FDI in the Indian aviation sector,??51% in multi-brand retailers and 74% in broadcast and media and in power exchanges

Hiking diesel prices by 12% and cut cooking gas (LPG subsidy)

Implementing power sector reforms and speeding up of the infrastructure projects

Creating a one-window approval mechanism (to be approved by the Prime Minister) which will discuss several long pending infrastructure projects

The impact has been impressive with the market hitting a 17-month high and the currency rallying hard. UTI are focusing on some highly compelling investment opportunities across the export-orientated theme (IT and Pharmaceuticals with strong competitive positioning and strong management bandwidth), the play on economic recovery theme (Public Sector Banks, Real-Estate and Consumer Discretionary), and value-orientated themes across a number of diversified companies that are trading at steep discounts to peers and historical valuations with a strong growth outlook.

This month ASEAN has stood out and most of the regional markets have recently hit historical highs on the back of robust economic growth and sustained political stability. The South East Asian region is the 9th largest economy in the world with a nominal GDP of USD 1.8 trillion, comparable to India (USD 1.6 trillion GDP) despite having half its population. The region counts a population of 601 million people which represents approximately 8.8% of the world?s population. Over half of the population is under 30 years old which will see the region?s working population rise to 278 million in 2015. Although valuations are temporarily elevated, our soon to be announced ASEAN manager is positioning the portfolio to benefit from the strong demographic story and rising middle class theme. At the same time, the region has also demonstrated strong economic resilience on the back of a mainly domestically-driven economy. Fiscal flexibility by the regional governments allow for counter-cyclical measures to be implemented if necessary.