Kilter Rural’s open-end farmland and water investment fund, the Kilter Agriculture Fund, has reached A$64 million ($41 million; €39 million) in assets under management.

The firm launched the fund earlier this year and held a first close on A$15 million in June 2023. The fund has a long-term fundraising target of A$500 million.

Kilter Rural has used the capital raised to date to acquire several assets in the southern Riverina region of New South Wales, which together cover more than 7,000ha. CEO Cullen Gunn told Agri Investor at the time of the fund’s launch that the firm has access to a pipeline of around 14,000ha in adjacent farmland out to June 2024 that could help to rapidly increase the portfolio’s scale.

The Kilter Agriculture Fund will invest in mixed farmland assets as well as water entitlement, with up to 25 percent of the fund deployed into the latter, including a portion into the open-end Kilter Water Fund that will provide liquidity for investors.

The vehicle is targeting base case returns of 10 percent for investors, comprising 4 percent from cropping and grazing income, 0.9 percent from water incomes, land capital growth of 5.4 percent, water capital growth of 2.1 percent and 0.7 percent from carbon and biodiversity.

Agri Investor visited Kilter Rural’s aggregation last week, where Gunn said: “We like these environments because they give us enormous scope to optimize the massive area that they cover. These landscapes, unlike those acquired for our previous Australian Farmlands Fund, already have really special environmental assets, such as forests.

“That provides us with an opportunity to pick up assets that are undervalued and optimize them. We want these funds to be a catalyst for change – there are some key interventions that we’ll undertake… to turn a business-as-usual cropping regime into a carbon-neutral or net-zero [system].”

Gunn said the strategy is also forecast to deliver carbon sequestration benefits both above and below ground, with the aim of turning the operations carbon-positive over time.

Kilter Rural is 61.49 percent-owned by Australian Securities Exchange-listed fund manager Regal Partners and has around A$270 million in assets under management.

Its other managed funds are: the Kilter Australian Farmlands Fund, a closed-end vehicle that closed on A$69 million at the end of 2021; the impact-focused Murray-Darling Basin Balanced Water Fund, an open-end vehicle with A$92 million AUM; and the open-end Kilter Water Fund, with A$60 million in AUM. It also managed a mandate of A$70 million on behalf of an institutional investor.