The Sustainable Agriculture Fund is seeking to raise AUD220m (€148m) as it rolls out a long-term growth plan.
The Melbourne-based fund is backed by a number of Australian superannuation funds – including AustralianSuper, Christian Super, Catholic Super and AMP Capital Investors – along with three other investors.
Deo de Jesus, general manager for strategy at AgCAP, manager of the fund, told IPE Real Estate: “We are looking to raise AUD75m for secondary units and the balance of the raise to expand the fund.
“We have a review date next year, and some investors have asked us to test the market,” he added. “We are also looking to expand geographically, and to diversify.”
De Jesus expects to close the fundraising next year. He says it will take two years to deploy the capital.
“We think that for people to sit up and take notice of this asset class, funds need to be larger to make meaningful contributions to pension fund portfolios,” he told IPE Real Estate.
“We aim to grow the fund in stages - the next stage is to AUD300m, then to AUD500m and more over a time.”
De Jesus said North American institutions have shown interest in this asset class, but they look for a manager with experience; and one they can trust.
“Strong farm management skills are a given, however, strong trust and good risk management and controls are required,” he said. “These institutions are over 12,000 km away and it is difficult to manage farmland assets from afar.”
De Jesus said a meaningful investment for large groups can be over AUD100m.
The Sustainable Agriculture Fund, established in 2009, owns around 5,000 head of beef cattle and 3,000 dairy cattle on 17 farms, with a combined acreage of 24,000 hectares across the Australian states of Tasmania, South Australia and Victoria.
De Jesus said the fund delivered an annual distribution yield of 6% in the last financial year.
Absence of subsidies, he said, was to the industry’s competitive advantage. “Australian farmers compete without government subsidies, which can be taken away at any time.”
Agriculture involved long-term assets, so the issues of sovereign risk, rule of law, management capability and transparency were important.
Australia is one of half a dozen countries, he added, which has these attributes. It also has good land, and proximity to the Southeast Asian market.
De Jesus says successful agri asset managers in Australia are foreign-owned, such as Westchester, which is controlled by the US-based TIAA CREF.
Last August, TIAA-CREF Global Agriculture II, Westchester’s second global agriculture investment partnership, closed with USD3bn in commitments.