A new hedge fund which aims to capitalise on demand for environmentally sustainable food is being launched and managed from the Cayman Islands next week. Prairie Wind Advisors, which was established in Cayman Enterprise City (CEC) last year, will bring its Harvest One Fund to market to invest in companies looking to solve the world’s greatest environmental problems and the global shortage of food, which it says are the biggest crises of our time.
While most of the world’s hedge funds are domiciled in the Cayman Islands, it is unusual for the management firm to be based here as well and building up this substance in the industry is something that successive governments and groups like Cayman Finance have been keen to change over the years.
CEO Michael Kyne told CNS Business that he expects to have attracted US$10 million in equity capital within 60 days of next week’s launch and hopes to secure more investors for what he said will be a long term project in Cayman. “We are not here for the short term,” he said. “The opportunity is for a decade or longer.”
Kyne said he and his partner, Jayson Woodbridge, who will be based in his office in Zurich, Switzerland, decided to establish the management firm in Cayman, having already had ten years of experience dealing with service providers here with his previous firm, so there were a number of relationships in place to utilise and a good understanding of the legal and regulatory environment.
“When we came to look at Cayman in 2013/14 I was very impressed and the CEC programme was very attractive, enabling us to be residents and establish here for the long term and not just as an umbrella,” he said.
The new fund is set up on the Apex administration platform, with audit services from Deloitte and legal services from Walkers, in a one-stop shop, which Kyne said was very appealing for a new or emerging manager, as there is less administration and only one contact point.
“In the first number of years you really need to streamline as much as you can to focus on raising assets and not managing people,” Kyne explained. “It did cost a bit more but we decided to absorb the expenses and not layer it into the fund.”
Harvest One Fund is US dollar based and invests in equities with no futures, commodities or derivatives. It seeks investment opportunities in agriculture, food, health and the environment, in Western Europe, the US and Canada. It doesn’t invest in emerging markets, which Kyne said present too much risk with minimal growth, unstable currencies and prohibitive debt levels, now that the commodity cycle is over.
“Innovation is a major part of our fund strategy,” Kyne said, which will occur to a much greater extent in advanced economies. “We are focused on finding companies growing rapidly, finding solutions to what the World Health Organisation says are the greatest crises of our time: the global food shortage and the environment.”
The kind of global problems that Harvest One is looking to invest in solutions for includes water purification and the carbon footprint issue, where Kyne said a meaningful reduction is needed, as well as tapping into the elliptical growth in electric cars. On the food side, there is the emergence of the middle class globally in non-Western countries who are demanding higher levels of protein and a greater number of choices.
“We have seen significant food price inflation over the last three years and this won’t change once people have changed their diet,” Kyne said, “There is a huge opportunity for firms in this market.”
Other factors include the huge demand for healthy organic food and international produce, as well as plant based proteins being favored over animal proteins. “Things are happening and evolving so quickly in food and agriculture,” Kyne said. “There is no shortage of companies that fall in the areas we are looking at.”
In a global investing environment described as a flat sea with little islands of growth, Kyne says Prairie Wind Advisors offers a unique investment strategy, perfectly suited to the background of the principals, with Kyne running environment focused funds valued up to $1 billion in Toronto and Chicago and Woodbridge, a former investment banker turned wine entrepreneur.
Interestingly, the fund offers investors “total transparency” with direct access to the prime brokerage accounts, unlike the more typical monthly delay before an email is sent out. The fund has a total return strategy, shorting the overall market to protect the client, Kyne said.
In recent years, hedge funds and in particular commodity funds have leen accused of driving up the cost of food, especially for the world’s poorest, which has done little for the image of the asset class among the wider public. Kyne agreed that has happened and will continue, as with other commodities such as oil and silver, but Harvest One will not contribute to these price spikes as it invests only in companies and not directly in commodities, he said.
The focus now for the management firm is very much on researching investment opportunities and investor education. Initial investors are mainly high net worth individuals, with a number of relationships where Kyne said people really like what we are doing. “We will build our business a couple of investors at a time and we think that we’ll see very attractive returns over the next decade,” he stated.