Strategic imagination

Strategic investors are set to play an increasing role in agri investment globally and asset management firms should be open to aligning with them.

Greetings from London! It has been a busy few weeks on the road, but I’m now back in London reviewing my notes from my various meetings in the US and Asia. At Private Equity International’s family office forum in Singapore, I was inspired by the level of interest from that investor base where nearly 40 percent of the 101 family office and private investor attendees already invest in agriculture and agribusiness, while many that have yet to invest expressed an interest in doing so.

This is a topic I have covered before and I continue to hear from managers that capital from family offices and high net worth individuals is particularly valued for early stage projects. “Private investors tend to have staying power which gives them an advantage over institutional investors,” said one asset management delegate.

But on my travels, a number of firms – from an emerging Asia-focused independent agribusiness consultant to a global fund manager – pointed out that strategic investors, typically in the form of agribusinesses and large corporates with investment arms, are playing an increasingly important role in providing start-up capital for projects.

Many of these companies have a “development allocation to test the waters” in markets where they do not yet have a presence, a global manager told me. So the investment is not necessarily going to become part of the business’s core operations, but these strategic investors are using the process to grow their knowledge base and survey potential opportunities for later, argued a consultant.

Depending on the structure of the asset management firm’s offering, these strategic investors can play different roles and potentially bring much more to the table – key contacts or operating expertise, say – above and beyond simply writing a cheque. The most likely scenario is as a co-investor into individual projects alongside fund managers and/or institutional investors, but there are some strategic players that are considering investing into a fund in order to gain a better understanding of the agribusiness sector more generally, according to one manager.

There are, of course, risks, too – in the venture world, for example, it’s not uncommon to find entrepreneurs complaining that strategics wield too much influence and may have different short-term and long-term goals. That will vary from case to case – ensuring interests are aligned is unquestionably key.

But as we are all increasingly understanding, there is a big need for imagination and creativity when it comes to raising capital for agriculture and agribusiness investment. Strategics might be the best solution for some investment firms and particular projects, if a more traditional LP-GP approach is not working. The good news is that there are growing pools of potential investors; they just might not be where you initially imagined.

What are your experiences working with strategic investors? Get in touch at louisa.b@peimedia.com.