Paine Schwartz’s flagship Fund V lands $50m Rhode Island commitment

The $8bn pension was also an investor in the $1.2bn fund’s predecessor, which Paine Schwartz says generated a 7% gross IRR as of late March.

The Rhode Island Investment Authority has recommended a $50 million commitment to Paine Schwartz Partners’ $1.2 billion Food Chain Fund V on behalf of the state employee’s pension, according to its director of communications.

Evan Englander told Agri Investor that Rhode Island does not have a specific agriculture mandate, but Paine Schwartz’s offering was in keeping with the size and degree of specificity the $8.2 billion pension seeks in its developed-market investments.

The state employee’s retirement system was also investor in the vehicle’s predecessor, Paine Schwartz Food Chain IV, which surpassed an initial target of $800 million before closing on $893 million in early 2015.

Indication of Rhode Island’s commitment came soon after the Minnesota State Board of Investment’s investment advisory board recommended a $150 million commitment to Food Chain Fund V last week.

According to a presentation posted on the Rhode Island Investment Authority pension’s website, Fund V has a target of $1.2 billion, a term of 10 years from final close – subject to extension – and a five-year investment period. The vehicle targets 8 percent returns and 20 percent carried interest, according to the presentation, and has a management fee of 2 percent of commitments during investment period and 2 percent of net invested capital thereafter.

Its distribution waterfall is of the European variety, according to the presentation, meaning that a stated distribution schedule is applied at the aggregate fund level, rather than on a  deal-by-deal, “American” basis.

The vehicle’s strategy will focus on companies in the upstream segment of the food and agribusiness value chain.

Overall, Paine Schwartz’s 16 food and agribusiness platform investments, which have a total value of $1.9 billion, have produced a 36 percent gross internal rate of return and a 1.8x gross multiple on invested capital, the presentation showed.

Fund IV had produced a 7 percent gross IRR and a 1.1x multiple on invested capital as of late March through seven investments, according to the document.

Among those investments is Wawona Packing Company, a fresh fruit company headquartered in Cutler, California, in which Paine Schwartz purchased an unspecified stake for an unspecified price in April. The presentation showed Paine has invested $90 million in Wawona.

It also highlighted the firm’s research partnership with McKinsey, a consultancy. The tie-up was focused on both deep dives into specific industry sectors and longer-range strategic growth opportunities spanning the coming decade, Paine Schwartz partner Kevin Schwartz said recently.

“They take risks on our investments and are aligned with us economically – they don’t that with other private equity firms,” said Schwartz of McKinsey.

Regarding strategy, Schwartz said his firm would continue to focus on upstream investments and high-value crop production, highlighting Costa Group and Wawona as indicative investments.

“We see consumers continue to focus on healthy foods, traceability and convenience and those big buckets of consumer demand drive the supply chain,” said Schwartz. “We’re focusing on the production of crops that address those consumer drivers as well as services across the value-chain.”