UK - Farmland is the UK's safest haven, according to IPD data, but lack of supply effectively bars institutional investors from entering the market. Agricultural land returned 15.9% in 2011, up 9% over the previous year, and significantly above the IPD all-property index, which returned 7.8% for the year. Capital growth drove the return, accounting for 14.2 percentage points of the total. Data published last week indicate farmland also outperformed both equities and bonds over five and 10-year periods. IPD attributed the performance to rising commodity prices and strong demand for land. The report also pointed to the emergence of a two-tier market, with strong local demand for prime land and significantly weaker demand for poorer land or land with no development opportunities. Head of alternatives Mark Weedon said the distinction between prime and secondary was "probably historical, with more to do with the quality of the land than location, as it would be in other property classes". Smiths Gore, which sponsored the index, said recent changes to the UK's planning regime were unlikely to result in a major increase in development opportunities in the short and medium term. However, the surveyor pointed out that, in some cases, recently reviewed agricultural rents had risen by 20% after remaining frozen since the 1990s and anticipated yet higher increases in line with commodity prices. Pension funds including Swedish buffer fund AP2, US institutions TIAA-CREF and Texas Teachers, and Canadian pension fund manager British Columbia Investment Management Corporation (bcIMC) and Caisse De Dépôt Et Placement Du Québec have all invested in funds targeting farmland in the US, Australia and Brazil. Earlier this year Danish pension scheme PKA launched a subsidiary that would invest in agriculture. Yet despite its potential as a 'safe haven' asset class, Weedon acknowledged that institutional investors would struggle to gain exposure to UK farmland. According to the report, less land will be marketed in 2012 than last year. "Limited supply is critical. There just aren't lots of brownfield sites that can be converted into farmland," he said. "The amount of land is what it is. Investors won't be able to move into it on a large scale because the Crown Estate [the UK's largest rural landowner] is unlikely to sell," he added. Meanwhile, the Crown Estate last week posted annual returns on its rural portfolio of 19.5%. Of that, 13.3 percentage points represented an increase in capital value. The £8bn (€9.9bn) state-owned real estate company, which has entered into large joint ventures with Norway's Pension Fund Global and Healthcare of Ontario Pension Plan (HOOPP), linked rents on agricultural land to commodity prices in a major overhaul of its tenancy agreements last autumn. The Crown Estate acknowledged that scarcity and high asset values last year had squeezed opportunities for acquisition, despite an increase in the number of transactions compared with the previous year.