Asset managers struggle to find the right investors

Exposure to the right type of investors is the main challenge for agri asset managers when marketing their investment offerings, according to a recent poll of Agri Investor readers.

14 out of 27 participants (52%) said that finding investors interested in the agricultural space was their biggest hurdle while 22 percent said that positioning projects within the wider investment market was the main challenge. Time pressure took 15 percent of the vote and internal resource constraints and other factors took 4 percent and 7 percent of the vote respectively.

The novel status of agriculture as an asset class for institutional investors and their consultants is a major hurdle to finding the right investors, according to a UK-based agriculture asset manager. “Consultants don’t brief their clients on investment areas they themselves don’t understand,” he said.

The size of agricultural investment offerings can also be limiting as they don’t fit with an institution’s large portfolio asset allocation. One large UK pension fund head reportedly quipped “If I can’t invest hundreds of millions at one time, it’s not worth doing.”

The popularity of deals such as the Co-operative’s £250 million ($401 million; €314 million) sale of its farm business to Wellcome Trust, which attracted a bid from a consortium of UK pension funds, and TIAA-CREF’s multi-billion dollar collective investment offering are good examples of how big deal sizes can attract demand.

Private individuals and family offices have warmed to the sector far more quickly than the majority of institutions. “Agricultural investment is being led by endowments, family offices and more forward-thinking and better-resourced institutional investors,” said Paul McMahon, co-founder and managing partners at SLM Partners, an Australian beef-focused manager. “But we expect interest to grow as the fundamentals underpinning this sector will be around for decades.”

Private capital also have fewer commitments to draw down capital in any time frame than institutions like pension funds and insurance companies that need to pay their liabilities, Ian Monks, an agricultural consultant at consultancy firm Bidwells, said.

But further education could help raise the asset class’s profile and highlight the plethora of opportunities available, from agtech to consumer good production, according to Smital Rambhai, head of agriculture at Futuregrowth Asset Management, a subsidiary of Old Mutual Asset Management.

“I think the agricultural sector has definitely been neglected by investors in the past,” he said. “It is not a well understood asset class by investors and continual education around the merits will over time change this. Agriculture in itself is very broad as an investment as one could invest in agribusinesses, farmland, storage businesses, agri logistics, agri working capital/finance businesses, to name a few.”

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Don’t miss the Agri Investor Forum in Chicago on November 6-7, which provides a great opportunity to get exposure to the right type of investors, including Abu Dhabi Investment Authority, China Investment Corporation and Regents of the University of California.

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