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Exclusive: AgraShares shifts focus to separate accounts, advisory mandates

The Midwest-focused manager, whose $35m pooled fund is fully invested, notes a rise in interest across agri from investment consultants and their clients.

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The Midwest-focused manager, whose $35m pooled fund is fully invested, notes a rise in interest across agri from investment consultants and their clients.

AgraShares is seeking to raise money through separately managed accounts while it ponders launching a successor vehicle to its maiden fund.

The Chicago-based firm, whose $50 million of assets under management already includes nearly a third of segregated mandates, is looking to grow its assets by investing on behalf of high-net-worth individuals and tax-exempt investors, which include charities, pension funds and university endowments.

It is also open to advisory roles on funds with a broader mandate, such as natural resources offerings – looking after agriculture investments while others advise on mining, oil and gas or other assets, Geoffrey Lutz, a partner at AgraShares, told Agri Investor.

“We’re pursuing that separately managed portfolio strategy right now, but we would [also] consider investing if someone wanted to set up a fund and they needed someone to subsidize.”

AgraShares manages a $35 million fund focused on row, annual crops. Launched in 2012 and closed towards the end of that year, the vehicle was fully deployed almost straight away. “It hasn’t been that difficult to get invested in agriculture. It’s not like private equity or other less liquid areas to invest,” Lutz said. “We’ve always found there’s opportunities in this space.”

The challenge, rather, has been to draw in further commitments in the face of investor caution, something he attributes to investor prudence and the asset class’s slow maturation. “The returns, especially the income returns on annual cropland, are not as high as I think they would like,” Lutz noted. “And I think that the understanding of the asset may also have something to do with it.”

AgraShares uses row cropland indexes compiled by the National Council of Real Estate Investment Fiduciaries, which it aims to beat by 200 basis points on an annualized basis. A report published last year by NCREIF shows the segment posting 20-year annualized returns of 11.15 percent, though Q2 2016 performance was noted as much weaker, at an annualized 5.55 percent.

After years when investors’ diversification drive had not benefitted agri to the extent that he expected, Lutz said he’d observed a recent rise in investor interest. “I see more investigation, more evaluation by clients, sponsors and the consultants that service the institutional market.”

“I just find the international marketers looking for the best returns, good income and some safety,” he added. “They’ve been looking at all areas of agriculture to see what might best fit their clients.”