The UK’s Royal County of Berkshire Pension Fund has committed £30 million ($44 million; €39 million) for five farms to Milltrust Agricultural Investments’ (MAI) New Zealand and Australian buy-and-lease farmland funds.
This is the first open-ended long term farmland investment made by the Berkshire Pension Fund, and comprises five farm properties in New Zealand and Australia, according to its fund manager Nick Greenwood. The investment now represents 1.8 percent of the real estate portfolio, which makes up 22 percent of the fund.
“The investment will [be allocated] across these two funds in accordance with the opportunities we have identified in both countries,” Milltrust International Group chief executive officer Simon Hopkins told Agri Investor. The two open-ended funds invest in farmland assets including permanent crops, arable and pastoral farms. “Investors are free to determine the blend across the two funds that most suits their own asset allocation, ” Hopkins said.
Berkshire has already invested in food and water through co-investments. “We do have private equity co-investments in a variety of food and water-related companies, including nine co-investments through … private equity,” Greenwood told Agri Investor.
These investments include a hydroponic farm in the US, desalination company AquaVenture Holdings, plant protein substitute food company Hampton Creek, Vietnam and US fish farming business Australis Aquaculture, and US pecan grower, processor and packager National Pecan.
Asked why the fund had moved into agriculture holdings, Greenwood said: “It was opportunistic, in that we had an opportunistic fund sell its holdings and so we decided to roll this money into agricultural land as a stable low volatility asset with a nice yield.
“We have deliberately structured it so it did not have a finite life, as we’d rather have this as an ultra long-term holding.”
Greenwood said that he did not see agriculture as an asset class, but there is food and water in the fund: “The philosophy is simple: that the world’s population is growing and they need feeding. We don’t do complex.
“We [allocate] very broadly. We tend to have a couple of themes and allocate according to what the underlying security is and that is why farmland is in the real estate portfolio, and food and water is in co-investments in the private equity portfolio.”
Greenwood said that the pension had decided not to invest in mega agricultural funds as some British local authorities had done about five years ago, because “we did not want to take operational risks”.
UK pension funds do not usually invest in long-term farmland holdings, although UK charitable foundation The Wellcome Trust bought the Co-operative Group’s farm business for £249 million in 2014. It is understood that at least one consortium of UK pension funds bid for the Co-op farm business, according to a source close to the situation.
The Berkshire pension fund manages the local government pension scheme for 38,000 members with assets under management of $1.45 billion, according to PEI Research & Analytics.
Milltrust International Group is a global investment firm, which invests in agriculture in emerging markets through Milltrust Agricultural Investments. In 2014, the group had $100 million in assets under management, according to PEI data.