New Mexico SIC commits $200m to TIAA-CREF II – exclusive

The $20.26 billion New Mexico State Investment Council approved a $200 million commitment to TIAA-CREF Global Agriculture II yesterday.

The new commitment takes the collective investment vehicle to $1.6 billion and it is expected that it will raise a further $600 million at least, according to minutes from New Mexico SIC’s investment committee meeting earlier this month. The vehicle does not have a set target, according to Securities and Exchange Commission filings, although the minutes indicate that TIAA-CREF is targeting $2.5 billion.

New Mexico SIC’s Geraldine Barlow, director of real return, proposed the investment to the council’s investment committee on 12 February, joined by TIAA-CREF’s Jose Minaya, Biff Ourso and Deborah Ulian. During the discussion Barlow indicated that she expected a further $600 million in commitments from three institutions to “round out the fundraising”. Investment consultant Jack Koch of Townsend Group said that his firm expected to bring three clients into the fund for a total of $150 million.

The minutes also confirmed that the investors in TIAA-CREF’s first vehicle, the $2 billion TIAA-CREF Global Agriculture LLC, returned for the second fund. They are AP Fonden 2, which committed $750 million in August,  the British Columbia Investment Management Corporation and the Caisse de dépôt et placement du Québec, Canada’s second-largest pension fund.

“Geraldine indicated that staff had had detailed discussions with the initial three investors in the fund and felt comfortable that a key risk relating to an unexpected liquidity event was low,” read the minutes.

When asked whether other US investors were considering the fund, Minaya “expressed that US investors were still trying to find the right place for this type of investment in their portfolio however they do expect one other US investor in the fund”.

In proposing the investment, Barlow indicated that a single large commitment to TIAA-CREF II would be better than “multiple smaller agriculture investments”. The size of the commitment is similar to the council’s largest real estate funds and would provide a similar level of underlying diversification, she added.

When asked if the fund would consider investing into other agri assets besides row crops, Minaya said that he had considering processing assets in particular, but that they would belong in another investment product.

TIAA-CREF Global Agriculture II is a limited liability company with no set maturity that will invest into buy-and-lease farmland in Brazil, Australia and the US. It is not a blind-pool fund but is instead a means for investors to invest directly into assets via “club deals”, AP2’s portfolio manager Jessika Ingvarsson said last year.

Previous agriculture-related investments made by New Mexico SIC include a $50 million commitment to NGP Energy Capital Management’s NGP Agribusiness Follow-On Fund last February. NGP Agribusiness follows on from NGP’s Natural Resources X fund to which the council committed $75 million in 2011.

New Mexico SIC has a 10 percent real return allocation of which up to 80 percent will be real assets including agriculture, commodities, infrastructure, timberland, energy and farmland.