SEDCO Capital, the Saudi Arabian asset management firm, has raised $35 million in seed capital towards a rare sharia-compliant agribusiness private equity fund.
The fund is targeting $150 million and is structured as a co-investment vehicle which will invest alongside other GPs in the various emerging market regions it is targeting.
It is on the verge of making its first deal and is expected to close by the end of the year, according to Kamran Butt, head of client advisory.
“We have a track record of partnering with GPs across the world, who have established track records, extensive local knowledge and business networks,” Butt told Agri Investor. “In this way we can pick and choose the deals that fit our criteria and then do our own further due diligence. None of our investments will be made alone and while we will originate some deals ourselves, we will only invest in such opportunities if our partners choose to invest alongside us.”
The 10-year private equity fund will aim to invest into non-land agricultural assets across a range of agri sub-sectors. These includes inputs – such as micro nutrients and fertilisers, agriculture technology, food processing – such as milling and packaging, supply chain companies – including storage and distribution and consumer-facing brands – and retail companies. The fund is currently considering a Chinese poultry investment and a chain of restaurants in South Asia.
The fund will not invest more than 15 percent in one company and expects to invest in around 10-15 deals.
The fund is targeting family offices and ultra high net worth individuals for the most part, but is also speaking to some local institutions such as banks. It will have a global client base reflecting that of the firm’s other $1 billion of assets under management, according to Butt.
There are very few sharia-compliant agriculture funds. Last year Canadian asset manager AGInvest introduced a sharia product to its offering. But Saif Shawqi, business development at the Shariyah Review Bureau, believes there is plenty of potential for global agriculture sector to raise capital from the $1.1 trillion Islamic financial market.
“Being at the epicentre of the industry, we have seen significant demand for agriculture investments coming from the rising community of powerful Islamic investors who understand its true potential and investment worth,” Shawqi told Agri Investor. “Big players like SEDCO Capital are leading the race and we are confident that many other Islamic wealth managers will follow strongly.”
And the Shariyah Review Bureau is always looking out for agriculture asset managers to introduce compliant products to a growing agri investment market, added Shawqi.
SEDCO already has experience in agribusiness investment and has made 60 agribusiness investments over its 20-year history. It is targeting emerging markets for the most part because that is where the firm sees demand growth and inefficiencies leading to food wastage.
“In developed countries, food wastage tends to happen at the fork end, by the consumers. But in emerging markets, the wastage happens in upstream activities, in production and distribution, which is where some of our investment focus lies,” said Butt.