Laguna Bay Fund 2 ‘halfway to target’ after Development Bank of Japan commitment

Laguna Bay managing director Tim McGavin says DBJ is a ‘natural fit’ with the firm’s investment philosophy and hopes to secure further capital from Japanese LPs.

Australian asset manager Laguna Bay has secured a commitment to its second flagship agriculture fund from the Development Bank of Japan – the first commitment from a Japanese LP to the vehicle.

Laguna Bay managing director and founder Tim McGavin declined to comment on the size of DBJ’s commitment, which the Japanese investor also did not disclose, but did confirm to Agri Investor that Laguna Bay Fund 2 is now halfway towards hitting its fundraising target of A$750 million ($498 million; €462 million).

The fund launched in 2022 and has a hard-cap of A$1 billion. The only other known LP in the fund so far is Washington State Investment Board, which committed A$350 million last year, prior to the fund holding a first close on that amount.

On why DBJ was attracted to Fund 2, McGavin told Agri Investor the Japanese LP was a “natural fit” with Laguna Bay’s investment philosophy.

“We back high-performing partners, in a range of structures, to drive scale, productivity, efficiency and quality improvements – among other return drivers – in the assets in which we invest,” he said. “And we do so in a thoughtful, responsible manner from both a social and environmental perspective. That’s easy to say, but quite hard to do.

“We believe the DBJ were impressed by Fund 1’s investment accomplishments, the deep operating experience in our team, and the fact the firm is owned by the team,” he added, as well as arguing DBJ sees the benefits of investing in a diversified strategy like Fund 2, which targets investments in Australia and New Zealand in row crops, permanent crops, livestock, water and aquaculture.

When asked whether Laguna Bay anticipates further commitments from Japanese investors, McGavin said: “We certainly hope so as we’ve spent six years building relationships in Japan. We trust DBJ’s investment will attract interest from other LPs who have been considering agriculture, particularly given DBJ is one of the most experienced agri LPs in Japan.”

McGavin also said the current fundraising environment is not straightforward, but that it was not deterring the firm.

“Fundraising is never easy but we don’t want easy money. We want like-minded, educated investors who value relationships – we’re halfway to our target in that respect. The denominator effect is real and we’re seeing illiquid allocations have shrunk off the back of the selloff in liquid markets,” he said.

In a separate statement, DBJ said: “Through its investment in Laguna Bay Fund 2, DBJ intends to gain advanced know-how to solve agriculture issues that are arising in developed countries, fostering further contributions to the industry’s next phase of growth.”