CDPQ launches in-house farmland and timber unit – exclusive

Managing director Nicolas Leyssieux says the C$365bn pension aims to deploy about C$2bn over the next five years, with a primary focus on the US and Australia.

Caisse de dépôt et placement du Québec has established a unit for direct farmland and timber investments and plans to deploy as much as C$2 billion ($1.7 billion; €1.36 billion) within the next five years.

The sustainable land management team sits within CDPQ’s infrastructure portfolio and is led by managing director Nicolas Leyssieux, who joined CDPQ in July after a two-year stint with Bamboo Capital Partners.

Leyssieux told Agri Investor the C$365.5 billion pension decided last year to create a mandate for direct investments into sustainable farmland and timber. He said he expects the program will eventually take the form of a limited number of long-term partnerships managed by a staff of less than 10 executives.

He declined to identify any existing partnerships finalized as part of the effort but Leyssieux did say CDPQ is in “advanced discussions” with some potential partners.

“We are seeking to replicate the investible universe into five, six or seven partnerships with aligned partners, whether they are peers, operators or managers,” Leyssieux explained. “I don’t say we will never invest in funds. This can be done when it’s justified for co-investments, or learning or pipeline, but it’s not the core of the strategy.”

Leyssieux said there are roughly C$500 million in legacy CDPQ fund investments that are relevant to the sustainable land management unit, including commitments to both iterations of the TIAA-CREFF Global Farmland Fund.

He highlighted that while the sustainable land management unit focuses only on timber and farmland, CDPQ has carried out ag-related investments from other parts of its portfolio. CDPQ’s participation in a C$150 million round for Canadian agricultural co-op Sollio Cooperative Group, for example, drew from its fixed income portfolio, meanwhile a $125 million collaboration with S2G Ventures is categorized as part of its 2017 pledge to reduce its carbon intensity per dollar invested by 25 percent by 2025.

CDPQ’s sustainable land management unit is hoping to construct an overall portfolio with a roughly even split between farmland and timberland, Leyssieux said. Within ag, he said, plans call for a balance between row and permanent crops. Leyssieux declined to discuss return expectations in detail.

Geographically, he said, the primary focus of the sustainable land unit is the US and Australia, with some scope for investments in Canada, Latin America or Europe.

“In Latin America it’s likely that it would be Chile and in Europe it’s likely that it would be Portugal and Spain,” he added. “I like other geographies, but they are too adventurous for an institutional investor.”

At Bamboo, Leyssieux’s role included management of its Tech4Impact Fund and a seat on the investment committee for its ABC Agricultural Fund, according his LinkedIn profile. It shows that previously, he spent more than 10 years as the director for agricultural investments for a single family office.

Leyssieux explained that position saw him engage in extensive international travel and hands-on management of agricultural assets that included a 20,000-acre grain farm in Eastern Europe. He said the experience helped convince him that direct investments are the best approach for farmland.

“When you gain this understanding of the business and are ready to be long-term, patient, constructive capital – which we are – this is the best option,” he said. “This is what makes you understand the business and makes you more efficient; not only in your return, but also the way you do things. For example, when I was managing a relatively modest farm, I could implement ESG certifications, which nobody thought about. Since you are hands on, you do it and you know how it works.”