NMERB ups exposure to ‘serious asset class’ – exclusive

The $11.3 billion New Mexico Education Retirement Board (NMERB) voted to commit $30 million to Southern Pastures, a New Zealand-based sustainable dairy farm fund, at a recent board meeting. The new investment takes the fund’s agri and timber exposure to $290 million.

And the fund is keen to increase its exposure further and is assessing other investment opportunities, according to Mark Canavan, senior portfolio manager of the real assets division at NMERB.

“It’s hard to look at the financial crisis, and not see agriculture as a serious asset class, and a beneficial alternative to standard asset classes. There’s a lot more interest [in agri] out there, including from institutions,” he told Agri Investor. “The worldwide food story and demographic trends make agri investment very attractive as demand for protein is prolonged and there is robust data to support that,” he added.

NMERB already has $50 million invested with Halderman Farm Management, a US-based crop farm asset manager, which it mandated in 2012. And another $50 million mandate with Hancock Agricultural Investment Group, the large institutional manager that invests directly in row crops and permanent crops throughout the US, which it mandated in 2011.

In timber it committed $30 million to Brookfield’s Brazil Timber Fund II in 2012,  $25 million to Conservation Forestry Capital Fund II in 2008 and made a $45 million commitment to Eastern Timberland Opportunities II, managed by Timberland Investment Resources, in 2013.

On the debt side, NMERB has $50 million invested in the Amerra Capital Management’s Amerra Agri Fund II. It bought a stake in 2012.

NMERB has no specific preference in terms of investment vehicle, structure, time frame and geography, preferring to keep the fund’s options open. The fund accepts that agri investments are long term and has structured the portfolio to hold these types of assets indefinitely, according to Canavan.

Despite a generally positive attitude towards the asset class, Canavan believes there are reasons to be cautious. “I think there are initial signs that there’s some overheating in the agri investment space,” he told Agri Investor. “There are hedge funds and financial engineers entering the market who have never actually been in farming, or ranching, or any other ancillary business. These people fancy themselves to be agri investors when they have little if any agri experience, simply because they think their skills translate to investing in any asset class,” he said.

Mark Canavan will be speaking at Agri Investor’s forum in Chicago in November.