Italy’s first ag fund targets double-digit returns

IDeA Agro has raised around 80% of its €100m target from a clutch of institutional investors. MD Gianandrea Perco tells Agri Investor why he thinks a successor fund could be much bigger.

The IDeA Agro Fund, which bills itself as Italy’s first private equity vehicle focused on agribusiness, has reached an €80 million first close a year after launch.

The capital was raised from “a few” Italian institutional investors, the fund’s managing director Gianandrea Perco told Agri Investor, comprising insurers and pension funds. IDeA Agro has a target size of between €100 million and €120 million, he said.

The fund, which has a 15-year tenure, caters to the needs of investors “with a long-term view,” according to Perco. He hopes to seal the vehicle’s first deal by the end of the year and a final close within 12 months.

IDeA Agro will target returns of about 10 percent net of fees, Perco said, comprising both capital appreciation and recurrent yield (distributed when the portfolio reaches maturity). “It’s kind of mix between real estate and a private equity fund,” he noted.

Perco explained that DeA Capital favored aiming for a €120 million fund rather than a one sized between €200 million and €300 million because “the idea is, once we have the opportunity to deploy the money with Fund I, we’ll be happy to launch a second fund. Also, the vehicle will have access to leverage.”

He expects that debt to come at a good price thanks to the fund’s ability to use farmland as collateral. “This will enlarge our investment capabilities by about 30 to 50 percent.”

The idea for the fund, which Italian asset manager DeA Capital Alternative Fund started marketing about a year ago, came from local entrepreneurs, who highlighted the role institutional capital could play in the sector by helping bring agriculture and agribusiness ventures to scale in the country.

The vast majority of assets will be purchased in Italy, which Perco said enjoys strong “brand recognition” in the food and ag sector. He describes DeA Agro as a first of its kind in Italy and one of a few in Europe.

“Agribusiness and sustainability are all themes that are present in the asset allocation strategy of large investors. After having had the opportunity to demonstrate the deployment capability of this fund, I don’t see any reason why some big institutional investor will not at least give a look either to the second closing of this fund or a new issue going forward.”

The fund will target organic crops, nutraceuticals, nuts and the wine business. “All of this have to be seen not only from a field perspective but also in terms of value chain.”

IDeA Agro will be advised on deal sourcing and asset management by local industrial partner Ettore Fieramosca.