Torsten Böhler, managing director of specialist investment banking firm Abacus Emerging Markets, reveals why Abacus has chosen agribusiness as one of its sectors of focus.
Abacus has just received its financial services authorisation. What made you choose agribusiness as one of your four main sectors of focus?
The disparity between demand and supply for agricultural land is very severe. This fact, combined with increasing interest in agriculture from Western Europe and the increasing prominence of food security concerns in the Middle East and Asia, meant that agribusiness was on our radar. Getting access to these assets is often difficult, however, so we saw an opportunity for us to facilitate relationships.
We have great access into Australia, for example, that we hope to leverage for our clients. We are already starting to work with a number of agri managers in Australia and New Zealand.
Why is it hard to access agricultural assets?
A lot of farming and agribusinesses are very fragmented which makes it hard for institutional investors to get to. The investment structures available for investors into these markets are also unsuitable for many so this provides an opportunity for us as well to help develop more attractive structures.
Which sides of the agri investment market do you intend to get involved in?
We may act as a placement agent for some asset managers or we could even get involved on the management side in due course.
What are the biggest obstacles to developing an agri investment business?
One of the biggest challenges is education. We hear that infrastructure is still hard for investors to get their head around so you can only imagine how much more difficult agriculture could be. So it will need education.
Another challenge is that agriculture does not really lend itself to major institutions in its pure form because farm investments are relatively small in comparison to other asset classes. It will not make sense for many to write a $20 million to $40 million ticket so they need another access route. It’s not as easy as a consolidation play. I think for the industry to really take off and evolve to the next level it will need much large-sized tickets.
Time zones can also make transactions difficult and do not help potential investors feel comfortable with their prospective investment. How can they manage it from here?
There is also almost too much choice which makes it difficult to deploy money. There is crop land, fisheries, agtech, supply chain agribusinesses, forestry, livestock and so on. It is still a very broad asset class. And because investors have been slow to pick it up, they don’t have the necessary expertise to build up their exposure.