PSP’s desire to partner could open doors for Australian superfunds

PSP Investments’ senior managing director and global head of natural resources Marc Drouin last week reiterated the C$169.8 billion ($129 billion; €109 billion) pension’s commitment to agriculture generally, and Australian ag in particular.

Speaking at The Australian’s Global Food Forum, a virtual event, Drouin recounted how PSP’s natural resources team has grown from seven people when he joined in 2014 with around C$1 billion in gross assets under management, to a juggernaut with 25 staff and approximately C$10 billion in AUM.

Of that C$10 billion, roughly C$7 billion is invested in agriculture (the rest is in timber), with half of the latter figure deployed in Australia.

Australia was the first place where PSP found traction with its ag investment strategy, Drouin said, describing the country as a foreign investor-friendly jurisdiction with a deep well of potential operating partners to draw from.

“PSP is doubling [in size] over the next decade, so even if we don’t increase our allocation [to agriculture], we’ve still got about a billion dollars to deploy,” Drouin said.

The pension isn’t done building out its portfolio yet, then.

PSP has already made a big splash in Australia, investing across a range of commodities and regions, including deploying capital in row crops, permanent crops, livestock and dairies.

So what is left to explore?

“I’d see us doing more of the same,” Drouin said. “Probably with more of a focus on permanent crops than row crops, if I had to guess, and probably doing more of that post-farmgate investment, so we can leverage the scale that we’ve built, and be a bit more meaningful to the larger customers that, ultimately, we’re serving through our farms.”

Moving more into the post-farmgate space in a bigger way would be a natural extension for PSP, with Drouin suggesting investments here would likely take the form of processing and distribution facilities for its permanent crop assets, particularly tree nuts, with the possibility of investments in storage for row crops and other general agri-logistics assets.

Perhaps most interestingly, Drouin said he is open to investing alongside Australian superfunds on future deals.

“We recognize that we’re far away and it’s great to have local operating partners on the ground. We’d be more than happy to have local financial investors alongside us, who are like-minded with the same sort of investment horizon,” he said, highlighting the existing partnership with NZ Super Fund on timber and dairy assets.

First State Super (now Aware Super), for example, told us recently that it was still not in a position to scale up in ag. Could partnering with a fund like PSP, with its already very sizeable portfolio, be one way to start addressing that challenge?