Why did CPPIB exit its $520m US farmland portfolio?

We canvassed the market to understand what motivated the $258bn pension's mammoth sale, which marked a turn in a strategy underpinned by what some describe as a 'very aggressive' deployment target.

Canada Pension Plan Investment Board’s $520 million exit from its US farmland investments came after having set an ambitious investment target for the four-year-old program, Agri Investor understands.

A source familiar with the matter said the C$328 billion ($258 billion; €221 billion) pension was aiming to deploy $5 billion over five years. The source added that they themselves had been in discussions to play a role in CPPIB’s US farmland program years ago, but demurred because they felt that CPPIB’s targeted pace was “very aggressive.”

“It was perhaps more difficult to manage and collect these unwieldy agricultural assets than they had originally thought,” the source speculated.

Citing people familiar with the matter, Reuters reported in April that Angus Selby, the executive who eventually went on to lead CPPIB’s farmland effort, had left the institution.

Ryan Sullivan, senior investment manager for real assets at Aberdeen Standard Investments, told Agri Investor that the fact CPPIB exited the market so quickly after entering in 2013 suggests the change was likely motivated more by a “strategic shift” rather than any disappointment with returns from the asset class.

Sullivan added CPPIB’s experience of having to sell its portfolio of Canadian farmland after changes to rules governing ownership by institutions likely also influenced its broader view of agriculture.

“People are probably always questioning the asset class,” Sullivan said. “In farmland, part of investing today is hoping that you are early, but the ultimate question of what is your return going to look like and who are you going to sell these farms to is a risk you have to be willing to take, given that it’s a much more emerging area.”

Agrarians at the Gates

Three sources have told Agri Investor of hearing that the buyer of CPPIB’s US farmland assets was Microsoft founder Bill Gates.

Longer-term foundations like the Gates Foundation continue to be interested in farmland, Sullivan said, and while he is not aware of Bill Gates having been involved in the CPPIB transaction, he has heard of Gates being active elsewhere in the farmland market.

“Farmland has been an asset class that has been owned by individuals for basically its entire life,” Sullivan said. “A lot of land is owned by very wealthy individuals, often it’s very uncorrelated and people like to look at it and see what they own. I absolutely think that folks like that will continue to play a role.”

A representative of Cascade Investments, an investment company affiliated with Mr Gates, declined to comment. A representative of Cottonwood Ag Management, an agriculture asset management team associated with Cascade, also declined to comment.

CPPIB representatives did not respond to messages seeking further detail by the time of publication.