European, North American LPs push Gunn’s cattle fund to final close

Two execs at the firm, which hopes to reach A$200m in AUM upon full deployment, say Canadian pensions are entering Australia ‘en masse and in a simultaneous fashion.’

Sydney-based Gunn Agri Partners has held its fourth and final close on its flagship Cattle Fund.

The firm declined to disclose how much has been raised in total but said it expects its assets under management to reach A$200 million ($154 million; €125 million) after deployment of all fund commitments.

Launched in late 2015, the vehicle targets IRRs of 10-13 percent through yield and capital growth, Bradley Wheaton, managing partner at Gunn, told Agri Investor. Its LP base comprises pension funds, endowments and sophisticated private investors including high-net-worth individuals, he said.

Investors came primarily from Europe and North America, with a sliver of commitments also originating from Asia and Australia. “This is interesting but it’s exactly what we anticipated,” Gunn chief executive Alan Hoppe told Agri Investor. “This is where there is demand for the sort of risk-and-return profile that the market offers. Australia is growing but remains way behind Europe and America.”

He observed that Canadian investors, in particular, had moved into the sector “en masse and in a simultaneous fashion,” noting that there was a flurry of medium-sized pension plans “moving into the space and into Australia.”

Buy-and-build strategy

Hoppe observed that, while the Cattle Fund is a closed-end vehicle, Gunn remains agnostic about structure. Indeed, the firm is currently developing two other strategies – in almond and row crops, respectively – that will focus on club deals funded through separately managed accounts.

But livestock required something bigger. “In this case we and the investors recognized that scale was a very important part of profitability in the Northern Australian beef industry, so we thought the fund was the best structure,” Hoppe said.

“It’s called the Agri Cattle Fund but could have been called the Agri Grass Fund. We’re very focused on turning grass into beef. And we’re selling products at farm gate, so we’re not involved in downstream processing.”

“We’re competing with other mums and dads rather than large institutions. We’re often the radar”
Alan Hoppe

Hoppe described the fund’s area of focus as the “most fragmented part of the industry,” where operating “at scale” while using technology to bring down costs could help generate sizeable benefits.

“We’re targeting those markets in Southeast Asia, buoyed by the rising middle class, rather than restaurants in Japan or the US. We’re offering a quality product at a lower price point.”
When asked whether competition was not heating up in that precise segment, he observed that mega-deals sealed in recent years – such as NAPCO or S Kidman – were largely trusted by investors willing to “pay a premium” to buy an existing portfolio of assets.

In contrast, he explained, “we’re going after farms that are smaller in size.” He noted that recent purchases have spanned the A$5 million to A$40 million range.

“We’re competing with other mums and dads rather than large institutions. We’re often the radar. Our strategy is to build rather than buy portfolios,” he said.