APAC family offices look to increase allocations to agriculture

Investors with an increasingly defensive mindset are looking to farmland and timberland as safe homes for capital, a report from Raffles and Campden Wealth found.

More than 40 percent of family office investors in the Asia-Pacific region are looking to increase asset allocations to agriculture, farmland and timberland.

Investors from the region are most bullish on the asset class, with 41 percent of family offices surveyed signaling their intent to increase their allocations, according to The Asia-Pacific Family Office Report from multi-family office Raffles and Campden Wealth.

This was compared with just 16 percent of family offices globally that plan to increase their exposure to agriculture, as well as 13 percent of family offices in Europe and 4 percent of those in North America.

Campden Wealth director Nick Hayward said at a media briefing in Hong Kong this week that prevailing economic conditions were leading more investors to consider the asset class.

“We see a swing on the defensive side […] If we look at commodities for example, 59 percent of Asia Pacific will stand firm on agriculture, forest and farmland, but 41 percent will increase their exposure to forest, farmland and agriculture, which I would argue is a very clear sign that they’re concerned about inflation,” he said.

The co-founder of a single family office in Singapore was quoted in the report on the attractiveness of farmland investing, commenting on an asset it owns in Australia: “We have been investing more in farmland directly. We also have farmland that we subcontract to an operator, but we don’t just rent it out, we take the operational risk.

“The returns are decent – 6 percent to 7 percent on a real asset that you don’t need to replace, in a safe country. There is climate risk, of course, and there are good and bad years, but we quite like it.”

The report cited environmental diversification as a tailwind for the sector, with one survey respondent from India stating they had been able to increase returns by moving into energy generation, thanks to their farmland assets.

“Our business is cement and sugar production; these are both commodity businesses. We’ve expanded our business through diversifying the uses of sugar. We have become involved in power generation. We produce ethanol, which is a byproduct of cane, and this is used as a fuel for generating power. The power is sold to the state electricity authority for distribution,” the wealth holder from an Indian single family office said in the report.

The report also found that seven out of 10 family offices in Asia have seen their assets under management increase in 2020-21, thanks to rising asset prices, stock market gains and high valuations in private markets increasing the wealth of their backers. This was higher than the global average of 61 percent.

Family offices generated an average 15 percent return on investments in 2020-21, in line with family offices in North America but ahead of their counterparts in Europe on 12 percent.

Additional reporting by Alex Lynn.