Folium Capital is seeking $500 million for its third fund, which will combine the agriculture and timber strategies that the Harvard Management Company spin-off has previously pursued through separate vehicles.
Folium Capital Fund III has an investment period of four years and a term of 12 years. Its strategy includes plans for developing new orchards and vineyards to help meet demand for health and nutritious plant-based foods as well as timberland investments focused on both wood and carbon.
Folium managing partner Andy Wiltshire told Agri Investor that even in the developed markets where the firm operates, opportunities exist to acquire land capable of supporting agriculture and timber together.
“Large properties often come with some flat river margin land, or flat land with good irrigation, but also some hill country; some land which is too steep or the wrong soil on which to do agriculture but would make excellent timber growing conditions,” he said. “In particular, even where it may have not been conventionally good timber growing, carbon markets may have made that a viable and realistic and profitable alternative on part of that land.”
Folium was established in 2016 by a group of executives who had worked together managing natural resource investments for the Harvard Management Company. It previously raised $680 million into distinct funds devoted to ag and timber from LPs that included a combination of family office, endowment, foundation, insurance company and state and corporate pension investors. Folium also manages a separate account, Marli Farms, which had raised $75 million from one investor from an investor Wiltshire declined to identify as of a mid-2021 filing.
Wiltshire has a degree in forestry and also serves as a board member of New York Stock Exchange-listed global forest product company Rayonier. He said recent focus on the potential for timberland to contribute to mitigating carbon emissions have brought new entrants that constitute the market’s most important recent change.
“You’ve seen the large technology companies make multi-hundred million-dollar commitments to decarbonization by acquiring forests. You’ve seen the big banks get involved and acquire large assets in timber in the US and elsewhere. We’re still seeing signs of new players at scale trying particularly to respond to corporate interests in decarbonization to gather and deploy funds,” he said.
“Most of that, to date, has been in the US, which is interesting because the US has some of the least developed carbon markets. It’s a measure of peoples’ expectations of the future development of carbon markets – whether it’s regulatory or voluntary. One of the things that gets us pretty motivated about this new fund is that we have not yet seen that large-scale activity so much in some of the other geographies we operate in.”
Folium manages timber and agriculture investments in Australia, Brazil, Chile, Panama, Portugal, Spain, the US and Uruguay. Wiltshire said for Fund III, the firm would also consider investments in New Zealand and look to continue an effort to create a geographically balanced portfolio that includes smaller-sized investments in riskier markets.
“We always said we were going to take a little more country risk in exchange for a higher-than-average expected return. We’re not really seeing people saying, ‘We’ve gotten nervous about one or another country’ – not people we ever expected to be in these funds, anyway,” said Wiltshire, who splits his time between New Zealand and Boston, where Folium is headquartered. “We’ve been willing to make the case to investors that a little country risk and also development activity – which pushes a significant J-curve into the beginning of these funds – are risks that they should take. It doesn’t suit every investor.”
Wiltshire added that while it remains unclear whether regulatory or voluntary carbon markets will prove more influential over the long-term, existing commitments by governments and corporates suggests continued demand for forestry-derived credits.
“They don’t call it global climate change for nothing,” he said. “We have to make these new investments in timber across anywhere where they can be socially and environmentally acceptable and profitable.”