Bonnefield brings in C$70m commitment for fourth farmland fund

Bonnefield Financial has secured a C$70 million ($55 million; €47 million) commitment to its fourth farmland fund from an unnamed “large Canadian pension plan”, the Toronto-headquartered farmland investment manager said.

Bonnefield Canadian Farmland LP IV held a first close on C$60 million in August 2016. It will target high single-digit to low double-digit returns, president and chief executive Tom Eisenhauer told Agri Investor.

In March, Bonnefield launched an open-ended fund to solicit investments from high-net-worth individuals and family offices. That vehicle combined assets that had previously been held within the firm’s first two closed-end vehicles, closed in 2010 and 2013 respectively. It was created in response to demand from investors for longer-duration exposure to farmland, according to Eisenhauer.

Bonnefield’s third fund, which is now fully invested, surpassed an initial target of C$200 million before closing on C$261 million in early 2014.

Eisenhauer said that, while Fund IV is open to non-Canadian institutions, all of its investors thus far have been from Canada and Bonnefield is not actively targeting non-Canadian pension funds. While that is largely because there is sufficient demand from Canadian institutions, Eisenhauer explained that the approach can also play a role in the firm’s search for farmers to lease to.

“Farmland, like it is everywhere, is a very emotional asset for farmers,” he said. “As we stand now, when we are talking to them and they say: ‘Where is your money coming from?’, we say: ‘Look, it’s entirely Canadian money, it comes from Canadian pensioners and retirees’. Some farmers take comfort in that. Others, frankly, couldn’t care less.”

Inflation protection

Eisenhauer said that Fund IV will follow a similar strategy as the open-ended vehicle, targeting a mixture of row crop and permanent crop farmland throughout Canada.

“We’ve got a very heavy exposure to specialty crops like potatoes. We’ve got some permanent crops in there. We even have some orchards in there, though they are smaller allocations,” he said. “I suspect that we have built one of the highest-quality and most diversified portfolios out there when it comes to farmland.”

Even more than returns, Eisenhauer said, Bonnefield’s recent fundraising efforts have demonstrated the importance of farmland’s inflation-protection characteristics in the minds of LPs.

“The vast majority of our investors, whether they be institutions or individuals, are looking for safe, secure, steady, non-volatile, non-correlated returns. That’s the story,” Eisenhauer said. “Particularly as bonds are yielding nothing and looking very volatile. Particularly as equity markets look pretty toppy. Everybody that we are dealing with, almost universally, is saying ‘I just want safety and security in a world where everything else is priced to protection’.”