Martin Burda gave up managing US$8.1 billion of securities at the Czech investment arm of Erste Group (EBS) Bank AG for something that has produced better returns than stocks and bonds: dirt.
Burda, 43, last month helped start Cesky Fond Pudy, the first investment company targeting Czech farmland.
A second fund is raising money as soaring agricultural profits drive a surge in land values that contrasts with the stagnant stock market and near-zero yields on government bonds.
“Czech farmland is among the least expensive in Europe and it offers a conservative investor something that’s very hard to come by these days: safety and a good yield,” Burda told Bloomberg in an August 8 interview in Prague. “Profitable farmers mean upward pressure on land prices.”
Agricultural land values in the Czech Republic are rising after farming profits increased sixfold from 2009 to 2013, data from the statistics office in Prague show.
The new farmland funds are predicting returns of 6 percent to 10 percent a year as consolidation of smaller plots makes land management more profitable and the gap in prices closes with wealthier neighbors like Austria and Germany.
Avant Investicni Spolecnost, which oversees more than 10 billion koruna (US$480 million) of assets, has set up a farmland fund with a target of raising 250 million koruna, said Ondrej Pieran, a money manager at the Prague-based company.
Avant predicts an annual return of about 8 percent. Burda’s fund expects to attract more than 200 million koruna of investments by October, up from 140 million koruna now.
While farm purchases represent a fraction of the country’s US$31 billion stock market and US$64 billion of domestic government bonds, they ranked as the most attractive investment in a survey of 197 Czech and Slovak millionaires published by J&T Banka AS in June.
Sovereign bonds, commodities and Czech stocks were among the least appealing, according to the poll conducted from February to April by J&T and the Perfect Crowd research company.
– Contact us at [email protected]