The superannuation fund has spun out its impact investment arm to become Brightlight Impact, keeping an 80% equity stake. Former senior portfolio analyst Simba Marekera, head of research at the new entity, tells Agri Investor why it was spun out and whether the sector is automatically an impact play.
In 2014, when we last spoke with Christian Super, the organization was re-thinking its agriculture investment strategy. Where do things stand?
First, Christian Super has viewed its investments in agriculture as part of its impact investing portfolio. Last year, the impact investment team that was part of Christian Super was spun out into a separate entity called Brightlight Impact Advisory, of which I am now a part.
We continue to manage Christian Super’s impact portfolio, which includes agriculture, as an external consultant rather than an internal team.
Christian Super decided to invest in a farming operations fund, the Sustainable Agriculture Fund, in 2009. That strategy was informed by the need to diversify their exposure to a particular commodity risk, while also incorporating sustainable farming operations as a way of increasing the quality of the products as well as increasing efficiency.
From Christian Super’s perspective that strategy worked okay but not as well as they would have wanted. One thing was that trying to diversify against a particular commodity risk meant you don’t get enough scale in any particular commodity and therefore you don’t get the usual economies of scale as well as the ability to have some say in the price that you sell for.
So, to some extent it’s better investing in a big dairy farm, for instance, and having a small allocation to that because you know that that dairy farm or that dairy fund has critical market share; is a pretty efficient operation and has the capacity to sign long-term contracts.
I think going forward, it’s more likely that we will invest in several, single-commodity funds rather than one fund that’s diversified to get that economy of scale in any particular commodity. That’s one strategy we might consider.
While we expected an agriculture fund to be a relatively stable income-generating fund there was a lot of volatility caused by exogenous factors that the fund manager had no control over. And so, going forward, I think we would have smaller exposure to farm operations but we would be looking at opportunities where you are investing across the entire supply chain rather than investing in the farms themselves. It could be storage, agro-processing, or water rights, for example; or it could be investing in the land and getting paid a rent depending on the commodity.
That’s kind of where we are today – investing across the supply chain and investing in specialist funds.
Christian Super’s allocation to agriculture was 2-3 percent of its A$1bn ($760 million; €680 million) portfolio last time we spoke. Is that still the case?
Yes, that is still largely the case. We haven’t had an explicit agriculture allocation but we’ve invested in funds that have some portion of their funds allocated to agriculture.
Are you primarily looking at domestic investments for Christian Super or are you also considering other geographies?
Right now, we’re looking at opportunities that are global in nature. There’s only so much you can do in Australia, so in terms of trying to get a robust portfolio, we’re looking globally.
Are there specific criteria that apply to agriculture specifically or is agriculture considered an impact investment by default?
The key issue for us is that we’d like to see that the manager with whom we invest is committed to sustainable farming methods; or if they’re in processing then that they’re employing sustainable processing practices. So, we wouldn’t invest in agriculture where there’s no commitment to ensure that such systems are in place.
Why did Christian Super spin off the impact investing team?
The main reason was that Christian Super has been active in the impact investment space for over 10 years. In the past two or so years, we were getting requests from other institutional investors to help them set up their own impact investing strategy. We couldn’t do that as part of an internal team of another superannuation fund, so we were spun out in order to facilitate that and to have the flexibility to provide advisory services to other institutional investors.