The New Mexico State Investment Council is making its first major investment in agriculture as part of a $275m (€244.8m) allocation to real assets.
The US sovereign wealth fund has approved a $200m allocation to TIAA-CREF’s Global Agriculture II fund, its first major commitment to the sector.
Vince Smith, deputy state investment officer at New Mexico, said the fund had a previous small investment with Brookfield but that the latest commitment was its first “meaningful” investment in agriculture.
The investment will give New Mexico global diversification, with TIAA-CREF’s fund investing in the US, Australia and Brazil.
“This is one of the features about the fund we liked,” Smith said.
TIAA-CREF is looking to raise $2.5bn for the fund, which is anticipated to achieve net IRRs of 8-12%.
Around 4-5% of the return will come from income.
Land used for agricultural purposes and leased to farmers will be bought by the fund, with 70% of the portfolio made up of crops re-grown every year and 30% with permanent crops.
The fund, which has a 21-year life, will be leveraged at 20%.
A $75m commitment to Blackstone Real Estate Partners’ VIII fund has also been approved by New Mexico, which has The Townsend Group as its consultant.
The investment is part of $300m-400m planned for investments in real estate this year.
“One of the benefits we like about the Blackstone VIII is that it gives us some global exposure to our real estate portfolio,” Smith said.
Blackstone’s portfolio is spread across Europe, Asia and South America.
Jack Koch, a director at Townsend, said the bulk of investment would be in North America, with 25% in European assets and the remaining 15% divided between Asia and South America.
New Mexico is planning to focus on non-core funds, Smith said.
“We will be doing this mainly because we are all set with the core sector of our real estate portfolio,” he added.
