This large ASX fund is a large investor in Costa Group Holdings Ltd (ASX:CGC)

One of the largest ASX fund managers, Pendal Group Limited (ASX: PDL), recently became a major investor of Costa Group Holdings Ltd (ASX: CGC).

At the end of September 2018 Pendel, formerly BT, said it was looking after $46.7 billion of funds under management (FUM). The whole business’ FUM was $101.6 billion at the end of last quarter.

I thought it was very interesting that Pendal decided to take up a 5.2% stake in Costa Group, the largest horticultural business in Australia. Costa grows avocados, mushrooms, tomatoes, berries and citrus fruit.

Costa has become a more diversified business since it listed a few years ago, with it acquiring a number of avocado farms and adding another pillar to its strategy.

I like that Costa only grows healthy food, as there’s a clear increase in demand for its produce from what is likely to become the two largest buyers in the future: younger Australians and the Asian middle class.

I don’t quite understand the mocking of young people for eating healthy food, even if it is a little more expensive. The younger Aussies will soon become the main earning (and eating) demographic in the country.

There is growing Asian demand for high-quality, Australian-grown produce. There could be a similar, smaller effect that we saw with infant formula happen to fresh Aussie produce.

The wider themes of growing populations and water scarcity could also send the price of food higher. Some food experts believe the world could face a food shortage by 2030.

Foolish takeaway

I believe that Costa is an attractive long-term growth opportunity, particularly as it is predicting double digit profit growth for the medium-term. I also like that it currently has a grossed-up dividend yield of 3.1%.

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Motley Fool contributor Tristan Harrison owns shares of COSTA GRP FPO. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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