Packhorse aims to buck trend on raising capital from Australian superfunds

It’s a common refrain among fund managers Down Under: securing commitments from Australian superannuation funds for agriculture investment vehicles is difficult, if not impossible.

The reasons most commonly cited are threefold: the regulatory environment makes it difficult for them to commit large sums to agriculture; it’s hard for them to find the scale required in Australia to make it worth their while; and they have actually tried it before, when it didn’t go so well for many of them.

A leading figure in the superannuation sector told us once that another reason superfunds didn’t invest in farmland was that they already had exposure to agricultural commodities through their investments in public equities – something of a misunderstanding of the diversity benefits that farmland itself can bring, separate to other food-related investments.

Let’s not forget, too, the talk of creating an ‘IFM Investors for agriculture,’ where industry superfunds would club together to create a new collective vehicle for ag investment. Those grand promises are yet to materialize years after they were last seriously floated.

But Packhorse Pastoral Company, which last month launched its first fundraise with a splash, still holds out hope for Australian superfunds.

The firm’s chairman Tim Samway told Agri Investor this week in an in-depth discussion that Packhorse’s vision is “Australian land for Australian investors,” and that it has already politely declined interest from overseas investors.

It aims to raise an initial A$300 million ($232 million; €191 million), potentially rising to A$1.5 billion over the next five years, and in an ideal world it wants it all to come from Australian investors only.

When asked if this might be fanciful, to raise such a large sum from a sector that has famously been reluctant to commit capital to ag recently, Samway disagreed. He cited a combination of his experience leading Hyperion Asset Management, an equities fund manager that has drawn large sums from domestic investors, alongside early interest from superfunds with defined benefit pension plans that were interested in Packhorse’s open-ended, permanent capital structure.

“Clearly, the longer term will require some bigger institutional investors to come in with larger amounts. We don’t expect to raise it all from family offices and high-net-worth individuals – but we’ve had interest already from some large superfunds, especially those with defined benefit plans where their liabilities are extremely long term,” he said.

If this doesn’t come to fruition, Samway acknowledged that Packhorse probably would have to open up fundraising to overseas investors. But it definitely wouldn’t be doing so in the initial round – still an unusual position to take when it comes to a pooled fund in Australian ag investing.

The size of the fundraising itself is unusual, so the added wrinkle of where Packhorse intends to source its capital will only have industry watchers keeping an even closer eye on how it gets on.