How to best structure agriculture investments is still very much up for discussion and fund managers are considering new product lines for investors, according to panellists at Agri Investor’s Australia Forum today.
“Our evolving house view is that closed-end funds are not necessarily going to service investors that well in the future and we are going to be rolling out changes to that effect in the near term,” said Elizabeth O’Leary, head of agriculture for Macquarie Infrastructure and Real Assets. Macquarie manages the A$750 million Macquarie Pastoral Fund. “With the variability of commodity prices and climate, the brightest person in the room cannot pick the best date to exit an investment. A structure should promote a long term view.”
Institutional investors on a later panel agreed that investing outside a fund allowed them to align their interests more closely with on-the-ground operators and limited pressure on timing of the exit, although exits were a big concern.
Bradley Wheaton, director at Gunn Agri Partners, said that exiting investments can be damaging to the local market and can destroy value if exits are forced. The company will provide its investors the opportunity to extend their investment in increments of five-year extensions as a result, he told delegates. “What this means for farm managers is that if they are doing a good job, we can crystallise that but the portfolio can also be roll over again,” he said.
Troy Setter, chief executive of Terra Firma’s beef cattle operation Consolidated Pastoral Company, took a slightly different line and said that having a set date for exit is a good way to create a constructive sense of urgency about creating additional value.
Jay Horton, managing director at Strategis Partners argued that crop insurance facilities offered a good way for managers to smooth volatility in returns and Simon Hopkins, chief executive of Milltrust International said that crop insurance was “an important revelation for us as an asset manager” giving a some degree of assurance to investors about the income they will receive.
“That’s what institutions are looking for,” said Hopkins. “They are not making long-term best-on capital uplift, they are making an income play.”
But Alistair Nicholson, chairman at Vulpes Agricultural Investment Company, warned that crop insurance is not available for more specialised crops such as fruits and nuts, the area in which he operates.