Australian industry superfunds: ‘We will create a collective vehicle for ag’

Australia’s industry superannuation funds are preparing to launch a collective vehicle for investing in agriculture, Industry Super Australia’s chief economist has said.

Speaking at Agri Investor’s Australia Forum 2018 in Melbourne, Stephen Anthony said: “We will do a collective vehicle, very much like IFM Investors or Industry Super Property Trust, in agriculture over the next few years. We are going to do this. Whether it’s many industry superfunds, or just a few, it will occur.”

Australian superfunds have historically been reluctant to invest at scale in agriculture, with the national government currently conducting an inquiry to determine the reasons behind this.

Anthony said the new vehicle may not necessarily focus on purchasing farm properties themselves, but rather seek to invest in the infrastructure around them and post-farm-gate businesses.

“We don’t necessarily have to buy producers, or even want to buy producers. We want to intensify their production by putting in a backbone of infrastructure around them,” he said.

“Potentially we could own property, but we don’t necessarily want to do that. After the farm gate, there are huge problems farmers face to extract value for their products.”

On the new vehicle’s potential strategy, Anthony did not rule out deploying pre-farm-gate capital, but emphasized the need to be respectful of producers.

“The last thing anybody would want me to do is tell you our funds are going to walk into the sector and take it over. I don’t think that would be in the best interests of anyone,” he said. “Australian producers need something equivalent to the old mutual institutions that used to provide a backbone to help them.

“In the absence of that, only large family operations can really achieve the sort of returns that are acceptable to financial markets. It may be possible through some sort of networked operation to do better than that.”

Anthony added that the collective vehicle could look to deal with the domestic grocery duopoly in Australia, where the market is dominated by two supermarket chains, Coles and Woolworths, which has not always resulted in the best outcomes for farmers.

He echoed comments made by Hostplus chief investment officer Sam Sicilia to Agri Investor in April 2018, who said superfunds were considering establishing an ‘IFM for agriculture’ and that high-level talks had already taken place.

“It’s going to take a collective investment spirit to solve the risk-management problem in agriculture and to get superfunds interested in investing,” he said in April.

Sicilia also noted that a research paper produced by ISA, and led by Anthony, had served as the starting point for discussions on the collective vehicle to begin.

Submissions to the inquiry into superfund investment in Australian agriculture close on June 22.