BCI eyes North America in building out direct investments

Portfolio manager Sameer Jinnah says fund investments and partnerships with the likes of Westchester and Paine Schwartz have supported the C$171.3bn pension’s aspiration to increase direct investments in global forestry and ag.

British Colombia Investment Management Corporation has established six platforms of at least $100 million through which the C$171.3 billion ($141.5 billion; €115.7 billion) pension has pursued direct investments in agriculture and forestry since 2015.

BCI’s agriculture and timber investments are housed in a renewable resources allocation that was combined with its infrastructure portfolio at the beginning of 2020. Its combined programs are valued at C$18.3 billion and constitute 10.7 percent of the overall portfolio.

Portfolio manager Sameer Jinnah told Agri Investor that although renewable resource markets tend to be cyclical and a relatively small portion of the overall portfolio at C$3.2 billion, the diversification they add is important to BCI.

“As long as we can stick to the overall mandate, which is to invest in real assets, I think forestry and agriculture will continue to be a big part of the program,” said Jinnah, who joined BCI in 2007, according to his LinkedIn profile. “The difference is: we can invest in forestry, agriculture and natural resources and if we don’t feel the timing is right, we don’t have to, because we do have our overall infrastructure program as the primary capital deployment vehicle.”

BCI’s agricultural investments began in 2012 through farmland fund investments, said Jinnah, which he declined to identify directly. These were classified as part of BCI’s real estate portfolio before being grouped with timber under renewable resources in 2015. According to Agri Investor data, BCI is an investor in both iterations of Westchester Group Investment Management’s TIAA-CREFF Global Agriculture Fund.

In June 2016, BCI paid $625 million to acquire a direct 9.99 percent stake in Glencore Agriculture, a commodities trader in which the C$475 billion Canada Pension Plan Investment Board owns a 40 percent stake. During 2020, BCI also established a strategic partnership with agribusiness specialists Paine Schwartz and included Toronto-headquartered farmland manager Bonnefield Financial on a list of its external partners.

Jinnah clarified that BCI’s participation in Los Angeles-headquartered Butterfly Equity’s early May acquisition of a majority stake in Monroe, New Hampshire egg producer Pete & Gerry’s was an investment from the pension’s C$17.8 billion private equity portfolio.

BCI’s renewable resource allocation mimics the overall infrastructure portfolio, in that it seeks a balance of roughly 80 percent direct investment and 20 percent fund commitments, Jinnah said. Direct investment opportunities, he explained, are a mixture of bolt-on and co-investments related to its fund investments and others developed with like-minded partners designed to grow independently as platforms.

“We have very few fund relationships,” Jinnah said, declining to offer more detail on specific commitments or platforms. “We consider them all strategic partnerships, which means they have a role in furthering our direct investment aspirations.”

BCI’s direct agricultural investments tend to have at least 50 percent real asset backing, Jinnah explained, adding the pension targets opportunities with a low risk/return profile appropriate for holds of up to 20 years. BCI works with an internal asset management team that assists its deal teams on direct investments, often through board representation, he added.

Investments from the portfolio have a range of return targets, he explained, from the mid-single digit returns expected of farmland investments to mid-teens returns sought via agribusiness and a third category of “ag-related infrastructure,” which targets returns between the first two categories.

BCI’s overall renewable resources portfolio is split roughly evenly between ag and timber, Jinnah said. He added that while North American timber markets have faced challenging conditions in recent years, Latin America has continued to offer attractive returns in timber and BCI has been active in both markets. In mid-May, for example, BCI was among a group led by BTG Pactual that purchased 80,500 hectares of Chilean timberland from Chilean forest products company Arauco for $385.5 million.

BCI had some existing exposure to Latin American ag through bolt-on acquisitions related to certain of its direct investments in North America and had been very interested to expand its agribusiness portfolio in the region, Jinnah said, but it has proved challenging.

“We found that when we did try to go to Latin America with our agriculture strategy – which was ’Let’s not do any more farmland, we have enough of it’ – our peers were in the region and there was a lot of competition for larger investment opportunities. It was difficult to underwrite,” he said. “It proved more difficult than we had anticipated.”

Covid-related travel restrictions have made it particularly difficult to underwrite new markets and sectors, Jinnah said. Partially as a result, he said, the focus of BCI’s search for direct agribusiness investments has returned to North America and existing relationships and sectors with which the pension already has some degree of familiarity (that he declined to identify further).

“There is a lot of opportunity in North America and we’ve seen that over the last few years. We think there is going to be more opportunity, especially after covid, when people really realize that food scarcity can be a real challenge and global supply chains can break down. I think there is going to be more of a focus on, not only growing food for populations, but transporting it, distributing it, storing it, etc,” he said. “We expect to be active over the next few years.”