APERS to vet Prudential and IFC for role in $85m farmland investment

The $11.6bn pension’s chief investment officer Carlos Borromeo says the two firms were selected from a list of seven in a search to fill a farmland allocation added for diversification.

The Arkansas Public Employees Retirement System will interview Prudential Agricultural Investments and International Farming Corporation in November over plans to invest at least $85 million in farmland.

The Arkansas Democrat Gazette reported that APERS’ staff had, during a late August meeting, discussed plans to interview the two farmland managers as part of plans to invest $85 million over the “next several years”.

The retirement fund’s chief investment officer Carlos Borromeo told Agri Investor that PGIM and IFC would make a presentation at a November 17 APERS meeting. He said the $11.6 billion pension worked with consultancy Callan to select the two firms from a list of seven. Borromeo declined to share the names of the firms on the full list.

He confirmed that the plans call for a single $85 million investment and declined to detail the precise criteria by which the larger group of managers was narrowed down.

“The criteria was simple,” Borromeo said. “An institutional farmland/agriculture manager, an open-ended fund was preferred, with zero additional timber exposure and invested solely in the United States.”

In April, the Washington State Investment Board committed $100 million to an open-end vehicle, the PGIM US Agriculture Fund, managed by Prudential Group Investment Management subsidiary PGIM Agriculture. Meeting materials said WSIB’s investment was part of PGIM’s efforts to raise $600 million, which would be used to add new properties to a $400 million farmland portfolio. The portfolio was housed in an investment vehicle that was being converted to an open-end structure.

Plans for diversification of the properties within the vehicle include up to 25 transactions targeting crop types such as nectarines, cherries, pecans, avocados, hazelnuts and table grapes, according to the WSIB presentation.

WSIB is also an investor in Kinston, North Carolina-headquartered IFC’s IFC Core Farmland Fund, an open-end vehicle targeting $1.5 billion to which it committed $250 million in September 2018. IFC is an institutional asset manager founded in 2009 that claims affiliation with agribusiness entities stretching back to 1827.

The Core Farmland Fund will seek annual returns of between 7 and 9 percent through investments in a variety of row, permanent and specialty crop farmland, according to materials shared with Agri Investor at the time of WSIB’s commitment.

The open-end vehicle had raised at least $415 million from five LPs as of late January, according to a regulatory filing. An April filing showed it contained a total of $1.5 billion collected through minimum investments of $100 million.

APERS’ existing real assets portfolio is valued at roughly $1.3 billion and made up largely of a “conservative” mix of core real estate and timber investments, according to minutes from a February meeting. APERS plans to increase its real asset portfolio from 12 to 16 percent of its total assets.

The minutes show APERS’ addition of a 5 percent farmland target at the meeting came alongside adoption of other real asset strategy changes recommended by Callan. These included an increase in APERS’ non-core real estate target, retention of timber investments due to begin liquidating in 2026 and elimination of energy stocks.

Borromeo told Agri Investor that farmland will serve the function of adding diversification for APERS, which he noted has been a timber investor since 1997. Asked about return expectations, he highlighted that NCREIF Farmland Index returns have averaged about 5 percent in recent years. Borromeo declined to detail APERS’ envisioned farmland investment schedule.

“The capital call projection is still TBD,” he said.

IFC declined to comment and PGIM representatives did not return messages seeking further detail.