Alaska’s Bader discusses increasing allocation to farmland

The Alaska Retirement Management Board's CIO Gary Bader talks about the fund's exposure to farmland and timber.

Gary Bader serves as chief investment officer of the Alaska Department of Revenue. Here he tells Agri Investor about the Alaska Retirement Management Board’s farmland and timber allocations.

What has been your experience investing in the agri sector so far?

We started investing in farmland in 2006 and it has been a good performing asset class. Farmland gave us an 8.5 percent return for the fiscal year 2014 and a 10.88 percent compounded rate of return for the past five years. The investments follow a buy-and-lease model. We rarely operate a farm.

Real assets investments account for about 17 percent of the portfolio and last year our exposure to farmland reached about $760 million, or 3 percent of the fund’s total portfolio. We also have about $364 million invested in timberland across the country. We have properties across the nation and are well-diversified, but we have no geographical preference for potential investments.

Does the pension fund have a set allocation for agriculture and timber within the real assets portfolio?

Our long-term target [for the real assets portfolio] is to invest 25 percent of it into farmland, 15 percent of it to timberland, 35 percent to real estate, 12.5 percent for infrastructure and 12.5 percent for energy-related projects. As of last year, we were 20 percent invested in farmland and about 10 percent in timberland.

Do you hire external managers to handle your agri investments and what do you look for in an agriculture asset manager?

We hired UBS AgriVest and Hancock as asset managers for farmland investments. Both of them have considerable experience in managing farmland portfolios. We look for managers that can reach the target return and have competitive advantages in the field. Our farmland managers are always looking for deals and we are happy with the job they are doing.

How else do you access agri and timber and where in the value chain are you more interested?

Other than farmland and timberland we are currently not involved in other sector of agribusiness such as agtech or agribusiness. Although water rights has been a hot topic lately, we are not really interested in making an investment in water rights now.

Going forward, what are the challenges and strategies in agriculture investment?

The challenges will be that farmland prices have been driven up in recent years and that we don’t find as many attractive deals as it in the past. A lot of people are now interested in farmland and pricing is more competitive.