SCERS commits $40m to Paine Schwartz amid real assets push

The Sacramento County Employees Retirement Association’s Board has approved a $40 million commitment to Paine Schwartz Partners’ Food Chain Fund IV as it pursues plans to increase exposure to ag and timber.

According to a monthly review of investment activity presented at the $9.24 billion pension’s September 19 meeting, the investment will be housed within SCERS’s real assets portfolio and is its first investment with Paine Schwartz.

SCERS’s private real assets portfolio, valued at $400 million, accounts for 4.3 percent of its overall portfolio, the pension said in June in an investment performance review. SCERS chief investment officer Steve Davis told Agri Investor that the pension’s real asset investments thus far have primarily targeted in energy and infrastructure.

“SCERS currently has permanent-crop exposure within agriculture, so Paine Schwartz’s dedicated focus within the midstream agriculture segment serves as a nice complement,” Davis wrote.

SCERS’s previous agriculture investments include a 2017 commitment of $40 million to ACM II, a vehicle managed by Agriculture Capital seeking low-teen returns through a strategy focused on tree nuts, citrus and blueberries. ACM II beat an initial target of $400 million before closing on $548 million in October.

In November, AC investor relations executive Atish Babu told Agri Investor the firm deliberately aimed to increase the participation of public pensions in its second vehicle.

In addition, SCERS supported a $7 million recapitalization for New York dairy products provider J&J Creamery through a separate account with Atalaya focused on real-asset-backed loans and a $3.5 million Heartland Forestry secondary transaction through a separate account with Pantheon, according to the review.

According to its 2018 Annual Investment Plan, SCERS intends to increase its total real assets portfolio to 7 percent of the overall portfolio by 2020. The contribution of a sub-class including agriculture, timber and “other” will account for between 10 and 30 percent of that real assets portfolio.

“Staff and Clearwater have been focused on real assets investment opportunities with a risk-return profile where a higher portion of the return is generated from consistent levels of contracted income that is less sensitive to the macro-economy,” SCERS said. “During the year, Staff and Clearwater focused on several real assets themes and investment strategies, including private-public infrastructure and global agriculture.”

Specifically, SCERS is focused on timber investments, capital equipment leasing strategies and opportunities along the agriculture value chain in the US and in the “top global agriculture companies,” according to the report.

Paine Schwartz Food Chain Fund IV is seeking $1.2 billion to invest in about 15 investments across the food and agribusiness value chain, notably in the seeds, high-value specialty crops and value-add processing sectors, according to documents presented to the Minnesota State Board of Investments.

Commitments to the vehicle have included $45 million from the Maine Public Employees Retirement System, $50 million from the Rhode Island Investment Authority and $150 million from the Minnesota State Board of Investment.

Earlier this month, Paine Schwartz hired former Monsanto vice-president of global strategy Steve Bierschenk to serve as managing director on the firm’s investment team.