Societe Generale Group has recently launched an agriculture fund covering staple commodities and agriculture-related stocks in a bid to capture the growth potential in the burgeoning sector.

The momentum in spiralling food prices - some of which have more than doubled in two years - will remain for the years to come, said market watchers.

Overseeing world's leading agriculture-related commodity and equity indexes, the Societe Generale's agriculture fund provides investors with opportunities in the fast growing agricultural market, said Frank Benzimra, bank's director of equity derivatives structuring department.

The 80 percent of the fund's exposure goes to Dow Jones-AIG Agriculture Total Return Sub-Index, a benchmark for agricultural commodities which reflects the returns that are potentially available through an unleveraged investment in the future contracts.

The index was composed by seven commodities including soybean, corn, wheat, sugar, soybean oil, coffee and cotton, as of Feb 29, 2008.

Another 20 percent exposure covers an equity indicator, namely SGI Global Agriculture Index, involving listed companies engaging in agricultural infrastructure, equipment manufacturing, irrigation, seeds and fertilizers production, according to the French bank.

The fund has been launched last week, and can be subscribed in 19 different banks' outlets in Hong Kong, with a minimum subscription of $3,000.

The initial sales charge is 5 percent and management fee is 1 percent per annum.

Castor Pang, a strategist at Sun Hung Kai Financial, said as the food prices soar sharply over the last 12 months, agriculture-related funds should yield good profit.

"Prices will probably remain high for the next year or two while the world is adapting to food scarcity. The increasing meat consumption, for example, has helped drive up demand for grain, and with it the price," he said.

"Agriculture funds should have good rewarding, however, as for individual funds, investors should pay extra attention to two key factors. They are price and profitability," said Pang, "funds are recommendable only when the prices are reasonable and profit foreseeable."

Derek Ng, vice president, Societe Generale's equity derivatives and structured products group, said the fund has received good response and he was confident that investors will get favorable results.

More people in developing countries are switching from starch-based diets to protein-rich meals. The per capita demand for meat has risen from just over 30 kg in 1980 to 41 kg in 2005, according to Food and Agriculture Organization of the United Nations.

(HK Edition 05/29/2008 page3)