QIC’s Phillip Cummins: institutions seek more active strategies

Queensland Investment Corporation’s global private equity principal Phillip Cummins has said investment in agriculture is increasingly attractive to international institutions.

He cited downgrades to credit ratings, global interest rates and global political risks such as Brexit and potential conflict in the South China Sea as reasons to invest in agribusiness.

Speaking at an Agribusiness Association of Australia event, Cummins said, “The investment case around food and agribusiness really does present a very compelling opportunity,” and is getting increasing airtime among international investors.

With the exception of some US institutions, investors are not looking for traditional farmland strategies, but “more active strategies” offering more liquidity and higher returns, he added.

“They can find [beta return] easier or cheaper in other spaces,” he said of passive farmland strategies. “Infrastructure, private equity are very much competitive assets for agribusiness, because it is easier to put money to work there. There are groups with well-established investment structures and very deep markets.”

Many co-mingled agri funds have also not yet reached institutional level, making it difficult to find opportunities when institutions have minimum ticket sizes of $100 million to $200 million, according to Cummins.

It could take five to 10 years for institutions to work out strategies through which to invest in and allocate agriculture on their portfolios, he added, with large-scale opportunities limited.

Cummins led the Queensland government-owned investment manager’s acquisition of an 80 percent interest in Australia’s North Australian Pastoral Company in May, on behalf of Queensland’s Long Term Asset Advisory Board and the UK’s Pension Protection Fund.

Cummins said QIC’s direct, open-ended deal within its private equity strategy was efficient, but that investors find it hard to allocate agriculture within their risk return and strategy allocation buckets.

“When you look at a lot of a lot of agriculture investments it’s a combination; there is the real estate component, the operating component, the commodity component,” he said. “So it doesn’t fit neatly like some other businesses do.”

He said in Australian institutions there was still strong reluctance to invest, however, as “they don’t feel as though they need to have [agriculture], [and in Australia] there have been a number of failures in the past that taint peoples’ perceptions.”

This extends even to his own organisation. “Some staff at QIC still don’t think [investing in Australian agriculture] is a good idea, [given] commodity and weather risk,” he said.

Other than North American institutions, he highlighted New Zealand Super Fund First State Super and some Asian pension plans as leading the way in making active allocations to agriculture, but “to really see serious investment from a broader group, not just the early adopters, will take five or so years”.

Political risk was another factor working against Australian business, he added. Cummins said the general elections had “not encouraged useful debate” on foreign investment in Australia.

He was echoing S Kidman’s managing director Greg Campbell, who when the second attempt to sell its assets, to a Sino-Australian consortium, failed, told Agri Investor: “A foreign investor requiring approval for a large agricultural deal [should] not to apply for the Australian Treasurer’s approval within 12 months of an Australian election”.

Meanwhile, Cummins said, disaggregating S Kidman properties would not necessarily “help institutional investors”. He said aggregation could present opportunities, but that it could also be off-putting for large local investors.

QIC has over $75 billion in assets under management, and is a global diversified alternative investment manager, created in 1991 by the Queensland government to serve its long-term investment responsibilities. Its clients include sovereign wealth funds, pension and superannuation funds, insurance companies and other institutional investors.