The Iowa Public Employees’ Retirement Association has initiated a review process for separate accounts managed by Forest Investment Associates and UBS Farmland Investors that could result in divestment from the vehicles.
Senior investment officer Pat Reinhardt provided an update on the review due to performance issues at $39.8 billion IPERS’ board meeting in December.
UBS and IPERS declined to comment. FIA did not return messages seeking further detail.
According to an overview presented by Reinhardt to the IPERS investment board in June, FIA has struggled relative to the policy objective but has exceeded or performed in line with the NCREIF Timberland index and UBS Farmland has struggled on an absolute basis and relative to policy objective and the NCREIF Farmland Index.
Reinhardt highlighted record high recent levels of inflation as a key factor in challenging its timber and farmland managers to reach a policy target of CPI +5 percent over the past five years. He described plans for a review that would take place over the next several months, as including study of the broader market and IPERS’ existing managers as part of an effort to “assess and align” ag and timber’s segment of the private real asset portfolio.
“Timber and agriculture provide a complementary function in an institutional private portfolio,” Reinhardt wrote. “In the current environment, exposure could provide an important inflation hedge and/or source of current income.”
The presentation showed that options for portfolio updates with UBS and FIA would include a study of liquidation options, attractiveness and a deep-dive on current assets to assess the current status and outlook of the portfolios. IPERS staff wrote that market developments dictated its “other real assets” requirements would be less than anticipated and likely to focus on infrastructure and non-core real estate funds.
Real estate accounts for more than 90 percent of IPERS $3.6 billion real asset portfolio, which constitutes 9.4 percent of the overall portfolio and includes investment in one infrastructure fund.
Its portfolio with FIA is valued at $207.3 million and includes about 50 percent of properties located in the Southeast, 40 percent in the Pacific Northwest and the remainder made up of Northeastern timber properties.
UBS Farmland manages a farmland portfolio for IPERS valued at $85.7 million, including 40 percent row crop properties, 10 percent devoted to both vegetables and permanent crops and the remainder devoted to an “others” category that includes feeds and hay.
Atlanta-headquartered FIA manages $4.8 billion through separate accounts and four commingled funds and was founded in 1986. It combined its North and South America units and added a sustainability director last year as part of a reorganization prompted by the changing nature of institutional capital invested in global timber markets.
UBS Farmland is headquartered in Hartford, Connecticut and managed $2 billion as of December, according to a March filing. In September 2020, the Orange County Employees’ Retirement System terminated an investment in the firm’s UBS AgriVest Farmland Fund and the Alaska Retirement Management Board added up to $300 million to an existing account managed by UBS.