Gunn Agri Cattle Fund increases 12% in value

The Gunn Agri Cattle Fund has grown in gross asset value to A$96.9m after only two quarters of operation.

The foreign-backed Australian Gunn Agri Cattle Fund has grown by 12 percent in value to A$96.9 million in the quarter ending June 30, according to management firm Gunn Agri Partners.

The firm is targeting a A$300 million final close for the fund, but has not specified how much it has raised to date.

It also reported an unaudited pre-tax operating result of A$8.6 million. It said that its positive results were driven by weight gain and increases in the value of cattle.

In March, the company bought the 18,338-hectare fattening, breeding and fodder-focused Goodar Station. Australian reports suggested a price tag of A$20 million ($15 million; €14 million).

“This is a solid result for the fund’s investors. Overcoming the traditional ‘J-Curve’ effect of acquisition, transaction and establishment costs to achieve an increase in the unit value in the first year of operation,” said Gunn Agri Partners chairman Bill Gunn. The fund held its first close last year.

It acquires and operates cattle production assets in Australia and is targeting properties in Queensland though the mandate extends to northern New South Wales and the Northern Territory. It is not clear what the term of the fund will be, but last June, Gunn Agri Partners director Bradley Wheaton, said that exiting investments can be damaging to the local market and can destroy value if exits are forced. He said the company would provide its investors the opportunity to extend their investment in increments of five-year extensions.

“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 rolled over again,” he said.

Chief executive officer Alan Hoppe told Agri Investor that it is still a good time to invest in Australian beef, despite some investors’ belief that the asset class is becoming too expensive.

“Global beef supplies have been constrained for several years, and although herd re-building has commenced in North America and in Australia, there is a biological limitation on the rate at which that supply can expand,” he said.

“Global beef prices are high and demand for beef continues to grow.  In Australia we saw the impact of the disruption of the live cattle trade, the strong Aussie dollar and the run of poor seasons all create a degree of financial pressure in the Australian beef industry.”

Hoppe said that such recent stresses were caused by non-systemic issues that had now all been corrected.

“We believe this is a great time to enter an industry that has a strong outlook,” he said, adding that Gunn Agri would focus on the integrity of its beef and on removing any production, transport and marketing inefficiencies.

“We need to continually research and innovate and be ready to change what we are doing in response to any challenges,” he said.

Bradley Wheaton previously held roles with Macquarie Agricultural Funds Management in Sydney and New York, including being appointed to the Board of Macquarie Crop Partners GP, a fund that has deployed over $400 million across grains and oilseed production assets in Australia and Brazil.

Gunn Agri is part of the Channel Group, a partnership of six investment management firms investing over $5 billion, according to the Channel Group website.