Farmland managers want to be flexible

In the wake of fund dissatisfaction among pension funds, farmland asset managers want to be flexible with their investment offerings.

Farmland investment managers that are considering launching funds for the first time are willing to be flexible when it comes to structuring their offerings, several have told Agri Investor. They are also willing to negotiate on fees.

Offering a flexible investment structure is symptomatic of real assets investing, argued Bernd Meissner, managing director at Kronstein Alternative Investment Advisors.

“Sponsor investors will ultimately decide the final structure of a fund or an investment vehicle in agriculture and this is typical for real asset classes,” he said.

But management firms are also pursuing this attitude in the wake of dissatisfaction from pension funds at the existing fund offerings available in agriculture; 57 percent of pension funds surveyed by real assets manager Aquila Capital in December said they were disappointed with the performance of closed-end funds and 42 percent were with specialist investment funds.

Some pension funds have given up on investing in funds altogether such as Danica Pension so investment managers and consultants are now trying to be flexible when attracting investors to the asset class.

“When it comes to structures and fees it can be difficult to tick all investors’ boxes under one fund but the model is not a deal-breaker,” said Carl Atkin, co-founder of Kinn Agri, the UK-based agribusiness investment consultancy and agribusiness investment management firm. “It is far more important to ensure investors are comfortable that agriculture is a space they want to be in; this can mean offering them a slightly different structure or opportunity to a standard fund investment.”

An agriculture consultant working for a firm that is about to launch investment management services in a similar region describes the firm’s position as “structure agnostic”.

“We would prefer to offer our farm investments in a fund but if investors want a more flexible structure with an earlier exit route than the typical seven to 10 years, then we can provide that. There is an equal chance of commingled funds happening,” he told Agri Investor.

Another fund manager who did not want to be named said that he would be flexible on the life term of his fund to suit early cornerstone investors.

Swiss private equity fund of funds house decided to create a co-investment platform after discovering how many different opinions existed on the approach to land-based investments. See Adveq creates agriculture co-investment platform.

Kinn Agri focuses on investment advisory in cropping farms in Central and Eastern Europe and the former Soviet Union although it has a wider global footprint and has consulted on African agribusiness investments in the past, according to Atkin. It is currently talking with institutional investors about investment opportunities in Central and Eastern Europe.