PSP to expand LatAm and European ag and timber footholds

Senior managing director Marc Drouin says underused irrigation infrastructure helped make the C$204.5bn pension’s entry into European ag a highlight within natural resources deployments last year.

Columbia, Peru, Chile, Brazil, Uruguay and Mexico are among countries PSP Investments is exploring to expand its ag and timber exposure to 5 percent of total assets, head of natural resources Marc Drouin told Agri Investor.

According to PSP’s annual report for the fiscal year ending March 31, the C$204.5 billion ($165.4 billion; €138.7) Canadian pension’s C$9.7 billion natural resources portfolio, which is devoted predominately to ag and timber, accounts for 4.7 percent of PSP’s total net assets.

The report shows PSP deployed C$1.9 billion into natural resources in fiscal year 2021, including its first timber acquisition in Chile, the addition of US vineyards in two unidentified states and a stake in one of the world’s largest olive producers.

Regionally, PSP deployed $900 million into North American natural resources over the past year and made $300 million of relevant investments in Australasia. PSP also reported deployment of $200 million into European natural resources over the same period and an additional $500 million to expand its footprint in Latin America.

Senior managing director and global head of natural resources Marc Drouin told Agri Investor PSP aims to construct a global ag and timber portfolio with roughly 40 percent allocations to Australasia and North America and the remainder devoted to the rest of the world, with particular focus on select European and Latin American markets.

Chile, Peru, Brazil, Columbia, Uruguay and, to a lesser extent, Mexico are among the countries that have been of interest to PSP in Latin America, according to Drouin, who declined to address any specific regional investments.

According to PSP’s 2019 responsible investment report, those investments include Brazilian coffee producer Grupo Montesanto Tavares. A source told Agri Investor in late 2019 that PSP’s Latin American ag portfolio also includes Chilean fruit producer San Jose Farms.

PSP’s natural resources investments generally come in the form of joint ventures with a focus on land and other biological real assets, Drouin explained. He added there are approximately 36 platforms headquartered throughout key global markets.

The 20 percent allocation to markets outside of Australasia and North America, he said, was created largely in hopes of adding exposure in the Iberian Peninsula, which is dominated by Spain and Portugal.

“Generally, in Europe, we don’t find particularly attractive [opportunities]. It’s expensive, you can’t get to the scale we need; there’s a lot of subsidies that one has to take into account,” explained Drouin, whose LinkedIn profile shows he assumed his position in 2011.

“The exception there really is the Iberian Peninsula, where there is quite a bit of not completely used irrigation infrastructure that can be tapped into and you’ve got a Mediterranean climate. We’re increasingly fond of permanent crops and we see an opportunity there. We now have a foothold in the Iberian Peninsula and are continuing to look at those kinds of things.”

According to the annual report, the operating joint venture PSP established in Iberia last year was with one of the world’s largest olive producers. The unnamed company’s near-term plans, the report said, include an expansion into almonds.

Almonds were the focus of another deal highlighted in the annual report: the December acquisition of California-headquartered Baker Farms by Pomona Farming, the farmland management company majority-owned by PSP that also manages its investment into Hawaii-headquartered farming company Mahi Pono.

Other relevant deals discussed include a $125 million loan to Indigo Ag secured by the agtech company’s intellectual property.

PSP’s annual report shows the pension acquired a total 200,000 hectares last year and now manages a 1.6 million ha global portfolio of ag and timber assets. Its natural resources portfolio grew by 10.6 percent in fiscal year 2021, adding C$2.1 billion that included C$1.1 billion in valuation gains and C$900 million in income, according to the report.