The $11.3 billion New Mexico Educational Retirement Board (NMERB) is considering increasing its commitment to Blue Road Capital, a vertically-integrated agriculture fund.
The pension first allocated to the fund in December with a $30 million commitment and the option to increase by a further $10 million. And Mark Canavan, senior portfolio manager for real assets at NMERB, wants to recommend the full increase to the investment committee in the coming weeks, he told Agri Investor.
When the Blue Road commitment is approved, NMERB will have $320 million committed to agriculture-related vehicles across farmland, timberland, conservation and debt.
Blue Road is NMERB’s first investment into a farmland fund; until now farmland investments have been made through direct deals with John Hancock Agricultural Investment Group and a separate account platform with Halderman Farm Management Services Company.
It had previously approved a $30 million commitment to Southern Pastures, the New Zealand dairy fund that recently closed, but the two parties were unable to reach an agreement on the contract, according to the pension’s board meeting minutes in December. Southern Pastures’ placement agent James Burgoyne said that the firm does not comment on individual clients.
Blue Road Capital invests into fully vertically-integrated operating companies. Its first investment was National Pecan Company which offers nationwide exposure to the permanent crop “providing diversification versus California-centric tree nuts such as almonds, walnuts and pistachios”, reads the investment committee minutes from 11 December.
At the December meeting NMERB also changed the weightings of its mandate with Halderman away from a 20 percent limit on permanent crops in the wake of a decline in row crop farmland prices in the US Midwest.
“Halderman commented that the row crop market peaked in the Midwest (Corn Belt) earlier this year [2014] and has slipped somewhat due to lower corn and soybean prices. As a result, Halderman expects farmland values in the Midwest to decline over the 12-24 months assuming normal production in the US and globally,” read the minutes.
The ability to invest over 20 percent of the mandate into permanent crops – where land values have typically held steady – will enable the manager, which had drawn down just $20 million at the time of the meeting, to reach the full $50 million mandate more quickly, the minutes read.
When the Blue Road commitment is increased, NMERB will have $320 million committed to agriculture-related investment including $30 million to Ecosystem Investment Partners II, an ecological restoration investment fund; $50 million to Amerra Capital’s Agri Fund II, a debt fund $30 million to Brookfield’s Brazil Timber Fund I; $25 million to Conservation Forestry Capital Fund II and $45 million to Eastern Timberland Opportunities II, managed by Timberland Investment Resources.
Blue Road starting fundraising in 2014 and recorded $35 million in commitments in a July SEC filing. It did not state a target fund size. Growth Capital Services, a boutique broker dealer, is listed as a placement agent in the filing. Blue Road was not reachable for comment.
NMERB has a 4.5 percent allocation, or $509 million, to natural resources in which agriculture sits. This is part of the 8 percent real assets allocation.
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