The Alaska Retirement Management Board is hoping to cash in on lower farmland values resulting from commodity price pressures and volatility.
“[In terms of] price pressure/volatility … we are long-term investors so are hopeful it creates investment opportunity,” investment officer Stephen Sikes told Agri Investor.
ARMB has invested $494.5 million into farmland through a UBS Agrivest-managed fund and $221.8 million into a Hancock Agricultural Investment Group fund. Both managers specialise in row crop investments. The firm’s allocation target remains 4.25 percent with the current allocation at 3.5 percent, meaning further acquisitions are still on the table.
The pension’s farmland strategy is limited to buying and leasing the asset.
Sikes said that while lower incomes for farmers could create headwinds for rents as the ultimate driver of returns, it was not clear whether this had also hurt ARMB’s agriculture investment portfolio.
“[It’s] hard to tell,” he said. “Returns last year slowed compared to previous years but were still acceptable in the context of the broad market. Lower income potential for farmers creates headwinds for rents which is the ultimate driver of returns.”
Hancock lowered rents in the past year due to falling farmer revenues, the manager recently told Agri Investor.
Sikes said that ARMB’s one-year return as of March 31 2016 was 5.97 percent, compared to 1.78 percent returns on the S&P 500 for same period. ARMB also invests in timber through a $252.9 million commitment to Timberland Investment Resources and a $96.7 million commitment to Hancock Natural Resource Group. ARMB manages and invests funds on behalf of several state pension plans. The board holds $28.22 billion in AUM, according to PEI Research & Analytics.