Alternative assets that buck the markets have been a sweet spot for global investors seeking higher yields. For many in Japan, where the Nikkei 225 has fallen 36% since August 2000 and bond yields have been minimal, the search for that sweet spot led them to cows.
Several decades ago, Agura Bokujo, once Japan’s second-largest beef producer, created a “wagyu beef ownership system” for retail investors, which promised returns of up to 8% every year, reports Japan Real Time. Investors could purchase ”wagyu” cows for $35,000 to $58,000 per head with the promise of their spawning lucrative offspring. In Japan, wagyu cows are known as the “caviar of beef” because of the way their fat enhances flavor. They are pampered with beer and massages to enhance their unusual marbling, and they typically produce steaks that retail for several hundred dollars a pound. At the end of a several-year-long contract, the farm agreed to repurchase the cows from investors.
But as it turns out, the cows were in the wrong place at the wrong time. The discovery of foot-and-mouth disease in 2010 year caused beef prices to plunge, and the farm slaughtered 15,000 cows. Shortly thereafter, the region where the farm was located was leveled by a the 2011 earthquake and tsunami, which damaged the nearby Fukushima nuclear power plant. The cows ate contaminated hay, which sparked fears of radiation contamination and led to a spike in contract cancellations. The farm’s cow production slowed, its debts piled up, and allegedly, the company started deceiving investors about its total cow count—it claimed to have 90,000 to 100,000 breeding cows; investigators only found 60,000. By August 2011, Agura Bokujo had filed for bankruptcy.
Now some 73,000 investors in the scheme have lost up to $4.34 billion—the biggest episode of consumer fraud in Japan’s recent history. The Tokyo police have arrested several of Agura Bokujo’s executives on suspicion of misleading investors.