EvaluatingRiskinAgriculturalInvestments

While adding more farmland assets generally lowers portfolio volatility, the benefits of diversification diminish beyond a certain point. As the number of distinct geographies increases, particularly when geographies exhibit higher cross-correlations, the incremental reduction in volatility becomes less significant. Moreover, the additional costs associated with managing and monitoring a larger number of distinct geographies—such as transaction fees, administrative burdens, and time spent monitoring each property—can begin to outweigh the benefits of diversification. This phenomenon, often referred to as “diworsification,” occurs when the extra cost of adding more distinct geographies erodes the portfolio’s overall efficiency, offering limited reductions in risk but imposing a significant drag on returns.View Full Report