Fundraising

Craigmore Fund II targets institutions with open-ended structure

The new fund, solely focused on the New Zealand dairy market, is targeting NZ$350m, with a final close to take place in the first quarter of 2016.

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New Zealand asset manager Craigmore Farming‘s second fund will target foreign institutional investors, and has a semi open-ended structure to tie in with their longer-term goals.

Craigmore Farming Partnership II will invest solely in New Zealand dairy and is targeting NZ$350 million ($228.36 million; $198 million), with the final close to take place in the first quarter of 2016, according to head of client advisory Nick Tapp. The firm is eyeing the end of 2015 for first close.

Unlike Fund I, a NZ$225 million fund closed in October 2014 from private and institutional capital, Fund II is aimed only at institutional investors from outside New Zealand.

Fund II has a semi open-ended structure instead of a typical 10-year fund structure because “we believe quite strongly that investments in farmland [should be] long-term assets and a number of institutions we are talking to are looking at the opportunity to hold high quality farmland assets for a longer term,” Tapp said.

Fund I was fully deployed with about 85 percent invested in dairy, 7 percent in red meat and 8 percent in horticulture, all of them in New Zealand.

“We didn’t make too many mistakes [with Fund I] so the broad acquisition and operation strategy for [Fund II] is the same,” Tapp said.

Craigmore buys and operates dairy farms, basic equipment, livestock and irrigation equipment in New Zealand. The average investment size varies from NZ$12 million to NZ$16 million. Tapp added, “Craigmore is looking for farms with reliable rainfall and water availability.”

In a recent report, Rabobank predicted the global dairy price will not start to pick up until the first quarter of 2016 and the sanctions from Russia on many of its suppliers will put further downward pressure on the sector. Tapp responded, “New Zealand continues to benefit from being the global low-cost [dairy] producer from having a dairy sector that’s predominantly grass-fed rather than grain-fed,” he said. “The position for the US dairy farmers is a bit stronger at the moment because the grain price is lower but that is cyclical. And at some point it will go the other way, while the price of the grass tends to stay the same.”