CROP is the first exchange-traded fund (ETF) designed to provide exposure to global small capitalisation companies engaged in the fast-growing agribusiness sector, including agricultural machinery, livestock operations, crop production and farming, and biofuels and alternative energy. It seeks to track, before fees and expenses, the performance of the IQ Global Agribusiness Small Cap Index (Bloomberg Index Ticker: IQSMCROP).
The CROP launch comes only one month after food prices soared 3.9% in February, representing the biggest monthly increase since November 1974. Meat and dairy prices also rose in February, boosted by higher prices for corn and soybean that are used in animal feed. Economists widely expect food prices to continue rising for the remainder of 2011. Earlier this month, the United Nations Food and Agriculture Organization announced that global food prices have risen to their highest levels since 1990, when the agency first began tracking them.
"Global supply shortages, changing dietary demands in emerging markets, growing populations, and alternative energy production are among the many powerful factors driving global demand and skyrocketing prices for agribusiness products. We believe these trends are likely to persist for the foreseeable future," says Adam Patti, chief executive officer at IndexIQ. "In our view, small capitalisation companies are best positioned to translate this demand into significant growth. They are under-represented in other investment options, are typically faster growing and, in many cases, are undervalued relative to mega-cap multi-national companies, making them attractively positioned for growth and for acquisitions by the larger global players. We believe CROP is an efficient vehicle for gaining exposure to this dynamic sector and to these companies worldwide."
The IQ Agribusiness Small Cap Index is float-adjusted and market capitalisation-weighted. To be included in the index, companies must have a minimum average market capitalisation of USD150 million for the prior 90-day period. Stocks are required to have a minimum average daily trading volume of at least USD1 million for the prior 90 days, and a minimum monthly volume of 250,000 shares for the prior six months. The Index’s components and their respective weights are rebalanced quarterly.