The €16 billion Danish pension fund AP Pension invested directly in its third Danish farm earlier this month as it continues to work towards an €80 million investment target in the asset class, deploying capital into a new farm every month.
The fund aims to invest 0.5 percent of total assets into Danish farmland by the end of the year. It bought its first farm in February.
While the target seems small, targeting anymore would be difficult, Søren Dal Thomsen, chief investment officer told Agri Investor.
“If it takes us a year to deploy €80 million, how long would it take to invest 5 percent of the portfolio [or €800 million] into farmland?”
The fund has considered investing into overseas agriculture projects and finds Australian and New Zealand opportunities particularly appealing, according to Thomsen. Eastern European Union countries are also attractive, he added, but the risk premium is not worth it.
“Our model for taking advantages of the generational shift in farming is clearly a strong one and we could take advantage of similar shifts elsewhere,” he said. “But if we do it outside of Denmark we would have to outsource management and the problem is that a lot of our investments in funds have not always ended up in the favour of the LP. We are walking in small shoes here. We don’t find that funds are always the right solution and when we use a fund, we need strong governance.”
AP Pension would not disclose the size of the farm investments in its portfolio so far.