Cayman fund manager to capitalise on global food shortage

| 24/03/2016 | 8 Comments

hedge fund tree(CNS Business): 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.

Tags:

Category: Finance, Financial Services

Comments (8)

Trackback URL | Comments RSS Feed

  1. Anonymous says:

    Mr. Kyne's Toronto company (Leeward Hedge Funds) was wound up in 2008. There was a lawsuit filed by Penson accusing Mr. Kyne and two others of inappropriately saddling a 3rd party with $33 million in losses. See http://www.finalternatives.com/node/8697

    Like (0)
    Dislike (0)
    Lol (0)
    Troll (0)
  2. Anonymous says:

    Does anyone remember what became of Mr Kyne's Toronto company - Leeward Hedge Funds? Are they still operating?

    Like (0)
    Dislike (0)
    Lol (0)
    Troll (0)
  3. Michael Kyne says:

    I wanted to respond to the comments listed above in order to clarify a number of factors. Our firm is not soliciting to the local Cayman community and is only marketing to accredited investors globally not retail. This is the same with any other hedge fund.

    We are not in competition with any locally based investment firms because our investment mandate is very specific to Agriculture & Environmental investments. My partner and i have over 50 years experience directly related to the investment mandate allowing us to have the ability and credibility to manage a fund dedicated to Agriculture & Environmental sectors. This is not easily duplicated and most certainly not locally. There is very little competition globally within this mandate. We deal with accredited investors only and not retail investors locally which require regulatory oversight.

    We pay significant fees including to CIMA, WP fees, and to the Gov't annually so that is not an accurate statement in the earlier post.

    One aspect to our business if you read the article is that we hired Apex Fund Services to fully administer our fund from valuation, client funds, and reporting. In addition we have adopted total fund transparency which allows all of our clients have access to the fund investment account real time. This is highly unusual policy for a hedge fund to adopt but we feel it will give our investors a greater level of trust with us as managers.

    Michael Kyne CFA

    Like (15)
    Dislike (6)
    Lol (0)
    Troll (0)
    • Anonymous says:

      Be that as it may. However, it still falls under regulated business, which means it should not be operated out of an SEZ. With your description, aside from the retails banks, all other financial services businesses could fall under the SEZ.

      I've worked for many offshore banks with a trust license and link people who work in company managers that do not do business with locals. Even in the classification of the license, it is restricted to do business with locals. So please explain what is the difference? As you say it is the same with any fund manager...All regulated financial service business pay CIMA fees and work permit fees for their expatriate workers albeit the work permit fees will be significantly higher than yours.

      Like (4)
      Dislike (0)
      Lol (0)
      Troll (0)
    • Anonymous says:

      Mr Kyne

      What type of SIBL licence do you have?

      Like (3)
      Dislike (0)
      Lol (0)
      Troll (0)
  4. Island Bundy says:

    With this being a SEZ based company, will Cayman residents be able to purchase the fund? If purchased by a Cayman Resident will this Company fall afoul of the SEZ rules regarding doing business in Cayman?

    Like (2)
    Dislike (0)
    Lol (0)
    Troll (0)
  5. Anonymous says:

    How is this firm allowed to operate at CEC when it is in direct competition with other regulated firms in Cayman? Is it CIMA regulated?

    I always knew this is where we would end up with CEC unfairly competing against local regulated firms that pay a small fortune in WP fees, CIMA fees etc. that all go to CIG when the firms at CEC pay little to nothing.

    Just wait until one of these CEC firms blows up and then the finger pointing will begin as to who should have known and how were they able to operate without oversight.

    I would love to here Minister Panton's opinion on firms like this operating out of CEC.

    Like (4)
    Dislike (9)
    Lol (0)
    Troll (0)

Please include your email address in the form below if you are using your real name. You can use a pseudonym, with or without leaving an email address, or just leave the form blank to be "Anonymous". All comments will be moderated before they are published. The CNS Comment Policy is at the top of this page.

%d bloggers like this: