Cargill to spin-off $7.4bn agri asset management division

Waning demand for Black River's hedge fund strategies is prompting the spin-off, which also includes its $2bn-plus private equity arm.

Agriculture investor and trader Cargill is to dismantle its $7.4 billion asset management unit, Black River, in the face of weak investor demand for its hedge fund strategies. It will also exit its private equity business, which manages over $2 billion of assets in sectors including agriculture and food.

Cargill said it would spin-off Black River Asset Management to employees in three separate divisions in one of the biggest recent shakeups in the agricultural investment industry. Black River was formed in 2003 and has 105 portfolio managers and analysts in 13 countries.

The break-up of Minneapolis-based Black River will take place over the coming months and follows a review of operations at the investment arm. The process concluded that an independent, employee-owned structure would serve investors better, including Cargill, which has pledged to keep investing with the new companies.

The plans follow a tough trading period for Cargill, which recently reported its first quarterly net loss since 2001 on the back of weakness in emerging markets. Black River has also suffered from lacklustre investor demand for some of its strategies and said in July it would close four of its hedge funds and return more than $1 billion to investors.

Black River will be carved up along its three principal business lines – fixed income relative value, emerging markets credit, and private equity. Two commodity funds will be moved to the company’s in house risk management division. Meanwhile, Black River’s chief executive, Gary Jarrett, will retire from the firm on October 1.

In contrast to the weak demand for Black River’s hedge fund strategies, its private equity arm has continued to attract strong investor support. Black River’s second food fund reached its hard cap last year, raising $700 million from investors for deals in emerging markets. Among its backers was Dutch pension fund manager PGGM, which promised to commit between $50 million and $100 million.

At the same time, the firm raised $587 million for its second agriculture fund, targeting Australia and Latin America, three times more than it raised for its first agriculture fund. Black River’s private equity arm also invests in metals and mining.