Harvard Management Company spin-out Solum Partners has closed its second fund on $850 million after attracting commitments from what it described as “a broad range of global institutional investors”.
Solum declined to comment on the fundraise.
Solum Partners Fund II’s strategy focuses on global production assets for crops including coffee, almonds, apples and berries. Eaton Partners acted as the exclusive placement agent for the vehicle, which was launched in late 2021 and had raised $717.4 million from 38 LPs as of a December 2022 regulatory filing.
Solum was established in late 2020 through a restructuring of Harvard’s natural resources portfolio that saw it spin out with assets that included farms in Chile and Peru and a substantial minority stake in California Olive Ranch (COR). Several Solum personnel – including chief executive Colin Butterfield – previously worked on ag investments as staff at HMC, which joined insurance company American International Group in making an investment of $200 million each as anchor investors in the firm’s first fund.
The status of Solum’s Fund I anchor investors was addressed in a regulatory filing shown in March. It explains that in exchange for “significant initial capital commitments” to Solum’s first two funds, anchor investors receive interests substantially different from other fund investors. It describes that in addition to services to an SMA held by the investor at which certain Solum personnel were formerly employed (HMC), anchor investors will receive a portion of Solum’s management fees and carried interest distributions, as well as other informational, participation and protective rights not offered to other LPs.
“The role of the anchor investors creates conflicts of interest as Solum has incentive to favor the interests of the anchor investors and/or their applicable investment vehicles,” the firm wrote. “Solum has adopted certain policies and procedures, including the investment allocation policies described herein, which are designed to mitigate the conflicts of interest associated with this arrangement.”
AIG did not respond to messages seeking further detail.
Butterfield told Agri Investor in October 2020 that Solum would look to mimic the investment approach developed at HMC, which focused on single crop verticals. In August 2021, Solum carried out what it said was its second transaction in the form of an acquisition of Monta Vista Farming Company, a California-headquartered almond processing company that followed a deal focused on coffee.
“Once we decided we are going to get into a fruit type, we really, really get into it very seriously,” said Butterfield, a Brazilian who held positions at Cargill and Brazilian sugar producer Cosan before joining HMC in 2016, according to his LinkedIn profile. “Once you do all of that with scale, physically, great opportunity starts popping up in the supply chain – be it through joint ventures, be it through arrangements we have, or be it through a minority or majority stake in some player that is too good in our fruit.”
In addition to Monte Vista in almonds and COR for olive oil, Solum’s investments have included AvoAmerica and Westfalia Fruit in avocados; Snake River Orchards and CPC International for apples; Peruvian blueberry platform Bomarea; and Ecoagricola, a joint venture with a specialty coffee farm operator in Brazil.
Risk associated with investments in Brazil was also among topics addressed in Solum’s recent filing. The firm wrote that Brazil’s economic, political and regulatory environments are “distinctive” and can affect portfolio investments through mechanisms that include minimum wage and price controls, tax policy, exchange rates and monetary policy, among others.
“Historically, the political scenario in Brazil has influenced the performance of the Brazilian economy; in particular, political crises have affected the confidence of investors and the public in general, which adversely affected the economic development in Brazil,” the firm wrote.
Butterfield has been described as a co-founder of an anti-corruption movement in Brazil called “Vem Pra Rua” that emerged in 2014. He is co-author of a 2016 book focused on the movement’s development that describes it as an effort to utilize street protests and social networks to increase pressure on politicians for change.