New Asset Class: Aquaculture

What does everyone think about aquaculture (i.e. fish) as an asset class? Owning fish makes just as much sense as owning timber. Timber is a long duration asset that is susceptible to disease, fire etc. Fish, on the other hand, can grow rapidly and turnover quickly and are therefore lower duration assets. If timber is the long bonds of the real asset world than aquaculture is more akin to bank loans. Active managers could add a ton of value here as this market is rich for fundamental research. Additionally, like fixed income, tons of opportunity for out-of-benchmark selection (crawfish, eels etc.). You could even run a long/short fund in this market. Let’s say you’re bullish on high quality names and think a junk rally is soon to end. Long salmon/short catfish. Great pairs trade with little to no systemic risk. Think emerging markets are going to grow and demand more fish but not sure what local preferences will be? Just purchase an aquaculture ETF and access cheap, beta exposure to this asset class. The opportunity for financial innovation is endless.

how is it different from ags enjoy!

They say the worlds fish stocks are plummeting (due to over fishing), so it seems like fish farms are the next big thing - even though they’ve already been around for awhile. Doesn’t sound like a bad idea to me. Side note: I read a couple articles recently that the worlds jelly fish population is soaring due to the lack of fish that naturally prey on them. “If jelly fish pop. increases buy aquaculture” is my motto.

It’s an industry for sure, and its likely to be relevant, but why would it be a new asset class? Ocean fish are basically commodities, but they have blurry property right enforcement, at least until they are caught. Fish farms, and cordoned off ocean and lake fish breeders are basically businesses and can be accessed through company equity or debt.

bchad, they do have transferable property rights in some places for rights to fish a certain volume or something. However, they are meant mostly for actual fisherman and there could be a bit of information asymmetry for anyone looking to purchase the rights.

Yes, I know a bit about common pool resource management, but in the ocean, these property rights are very difficult to enforce, although it is easier to do in coastal waters.

isnt this just like investing in meat? Anyways some of these firms are publicly traded, I was looking at a Chinese firm called HQS that farmed tilapia, apparently its a fraud or something…

My bank financed a fresh fish farm project and it turned out to be a fiasco. To answer what Palantir said, i don t believe it has anything to do with investing in meat, whereby you would just invest in a meat producing corporation. I believe that these farms are very capital intensive with a certain technology risk and an output as of a certain point in time in the future and as such are financed by non recourse loans, I.e. the whole project is packed in an spv which is financed through equity and debt. Could be wrong, but this is what I have seen so far.

It’s investing in the meat in the sense that fish is a commodity. If it is strictly farming, it’s not that capital intensive. If the company also does processing, that can be more capital intensive. It’s a poor business because it is seasonal with large swings in yield (weather, disease, etc.) and is inherently low margin with poor cash cycles. There are several public companies that do this, and the few I looked at all seemed sketchy (tilapia farming in rural China, etc. – sketch). Edit: Just pulled up the chart for HQS which is the one I looked at before and passed on. That didn’t work out too well for anyone long the stock.