Fundraising

Flurry of inexperienced investors ‘creates opportunity’ in Australian agriculture

Laguna Bay Pastoral Company boss Tim McGavin says the firm will probably launch a successor vehicle to its A$280m Australia and New Zealand-focused fund 'in the next year or so.'

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An influx of inexperienced investors into Australian agriculture could lead to more opportunities for those with experience at the end of the current cycle, according to the chief executive of Laguna Bay Pastoral Company.

Speaking to Agri Investor, Laguna Bay CEO Tim McGavin said: “I’ve never seen so many inexperienced investors in the market as I do now – so we should see some opportunities out of the back of it.

“Investment into Australian ag has always come in phases and this is the latest one of those, although there’s probably a lot more institutional backing now.”

Laguna Bay Pastoral Company operates the Laguna Bay Agricultural Fund, a vehicle that invests in a diverse portfolio of assets in Australia and New Zealand. It had its first close at A$280 million ($207.8 million; €177.5 million) in June 2016 and is around 50 percent deployed, according to McGavin.

Laguna Bay is likely to begin fundraising again “in the next year or so” following further deployment of capital, he said, for a vehicle similar in scope and size to the Laguna Bay Agricultural Fund. “It’ll be a similar sort of fund again, and we’ll be chasing like-minded institutional investors.”

McGavin believes Australian institutions to be “a while away” from becoming major players in domestic agriculture owing to structural issues in the superannuation sector.

He praised the benefits of investing through a fund, and thought the direct investment model wasn’t best suited to Australian ag.

“We don’t believe direct investing works very well in Australia,” he said. “That’s because they are long-duration assets, very hands-on and intensive, and they’re not like private equity assets where you just sit on a board.”

The fund model was also better for the “average portfolio manager” who might not have in-depth knowledge of farming, he argued.

Australian superfunds have begun to talk about the possibility of establishing a collective vehicle for agriculture investment, although only preliminary discussions have taken place so far.