Aware Super: Agriculture a ‘shining light’ in real assets portfolio

Brent Snow says Aware Super’s ag investments proved to be a useful diversifier in its infrastructure portfolio during the coronavirus pandemic.

Agriculture was a “shining light” in Aware Super’s real assets portfolio in 2020, associate portfolio manager Brent Snow has said.

Aware Super currently classifies its agriculture investments within its infrastructure portfolio, which sits at around A$9.5 billion ($7.4 billion; €6.1 billion) in value.

Speaking at a virtual event hosted by sister title Infrastructure Investor last week (February 24), Snow said the fund’s infrastructure portfolio had proved resilient during the covid-19 pandemic.

“It wasn’t an amazing year performance-wise, but likewise it showed the resilience of infrastructure [because] we still printed strongly positive single-digit returns for the year, net of fees and costs. That’s kind of all you can ask from an unlisted asset of a low-risk nature – [it’s] really there to diversify away from equities,” he said.

On agriculture specifically, Snow said the fund’s investments in the sector had performed “really well” since the pandemic began.

“It’s actually one of the shining lights, I think, of our portfolio – very resilient,” he said.

“We take a lower-risk view to ag. We generally aren’t owner-occupiers of our assets, we generally lease them out to operators and take a property-style play on ag. But the sector has held up well and land prices have held up well.

“It’s proven the uncorrelated aspect of ag with the requirement of people to eat regardless of economic activity. It’s proven to be a good diversifier for our portfolio.”

In September 2020, just after the completion of First State Super’s merger with VicSuper to form Aware Super, Snow told Agri Investor the fund was not in a position to deploy large amounts of capital in agriculture because investment at a much larger scale than was possible would be required to build a truly diversified standalone portfolio of assets.

The addition of VicSuper’s ag and water holdings at the time of the merger took the value of Aware Super’s ag portfolio to more than A$1.5 billion.

“We came to the view that if you’re going to get the sort of portfolio characteristics that you want from the asset class – things like capital preservation, inflation protection, uncorrelated returns – you really need to be very, very well diversified,” Snow said in 2020.

“In order to do that you need to deploy a lot of capital into the space and our view is that we’re not yet in a position to do that. It may be something we’ll consider down the track, but right now, because agriculture is a subset of our infrastructure and real assets portfolio, we don’t really have the capacity to go out and build a massively diversified agri portfolio.

“Even within that A$1.5 billion we only really have exposure to a handful of commodities – we’ve got a water portfolio, we’ve got our poultry infrastructure business, we have some exposure to tomatoes, plums, grains and some timber now through the VicSuper holdings. But there’s a whole lot of commodities that are still missing in that.”

Aware Super’s agriculture investments include several almond orchards that are leased to ASX-listed Select Harvests, a stake in Roc Partners-managed wagyu producer Stone Axe Pastoral Company, and a portfolio of water rights in the Murray-Darling Basin.

It also owns and manages stakes in the land registries of New South Wales and Victoria.