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PSP plans almond and water-focused US ag platform

The Canadian pension giant says it "plans to build scale in US agriculture" having increased its agriculture exposure by more than 11% in a year.

Canada’s Public Sector Pension Investment Board (PSP Investments) is launching a platform primarily focused on California almonds and water rights, according to the $135.6 billion asset manager’s annual report released on Wednesday.

The report highlighted PSP’s purchase of 10,000 acres of California almond orchards and water rights alongside an unidentified “partner with a strong track record.” The report says the platform will be PSP Investment’s “first direct investment in permanent crops.”

“PSP Investments aims to leverage the acquisition to launch a larger platform, primarily focused on California almonds and water rights, and to build scale in the US agriculture sector,” the report’s authors wrote.

PSP did not respond to requests for comment by press time.

The report says the pension plan’s $3.7 billion natural resources portfolio generated investment income of $500 million during fiscal year 2017. The growth translated to a 19.5 percent rate of return, surpassing its benchmark return of 5.3 percent, a performance the report attributed primarily to strong cashflows and valuation gains in its timber and agriculture investments.

Valuation gains and net deployments of $729 million led to $1.2 billion year-on-year growth in net assets under management, according to the report. The report said that timber and agriculture accounted for most of the increase in assets within the portfolio, which also houses PSP’s oil and gas investments.

Timber accounted for 60.9 percent of the natural resources portfolio as of March 31, according to the report, 11.6 percent less than 2016. Agriculture as a portion of the portfolio grew from 16.8 percent in 2016 to 28.1 percent in 2017.

“Natural Resources will continue to prioritize sizable, direct, long-term investments and building scale with like-minded partners,” the report said.

Ottawa-headquartered PSP expanded four existing agricultural platforms in 2017, according to the report. In May, PSP acquired a majority stake in Australian pecan grower, processor and supplier Stahman Farms Enterprises for an undisclosed price. PSP’s previous agriculture-related investments have included a significant minority interest in livestock monitoring technology provider Allflex and a joint venture with Australian livestock operator Hewitt Cattle Company.