Australia’s superfunds lag behind their global peers in exposure to the agri sector and should consider raising their allocation to farm assets says Industry Super Australia, the trade body for the country’s superfunds.
ISA says Australia’s A$2.2 trillion (€1.5 trillion; $1.67 trillion) superannuation fund industry currently holds around 0.3 percent of their funds under management in Australian and overseas agriculture, compared with global pension funds, which allocate more than 1 percent of their total assets to agriculture.
“For Australian superannuation funds, agricultural ‘real’ assets have the potential to provide bond-like current income streams from the annual earnings of farm businesses, and long-term capital appreciation from rising land values,” the report says.
ISA identifies a handful of Australian superfunds that are committed to agri, including VicSuper, which has invested A$180 million in farms over the past 10 years, First State Super and UniSuper, which holds timberland valued at more than A$600 million.
However, the report says that most “funds trustees and their asset advisors cannot readily identify the top quintile of producers in terms of their risk-return profile” and “have little understanding of the sector at all.”
ISA says superfunds have around 0.2 percent, or A$1.56 billion, invested in Australian agriculture and compares the relative lack of investment in the country with the major Canadian pension funds and groups such as US-based Teachers Insurance and Annuity Association, TIAA (and its subsidiary Westchester Group of Australia), which have invested in excess of $1 billion in Australian agricultural assets since 2007-08.
The report says superannuation funds that have no previous experience with agriculture “could build up their understanding by investing in expert institutional players and/or top tier producers directly. Australian superannuation funds could also roll out more obvious equity and/or debt products targeting successful large to mid-tier operators and up-and-coming rural producers.”