Pension funds in the US and the Nordic countries are more aggressive investing into Australia’s agriculture industry whereas superannuation funds are missing out on this opportunity, Jason Silm, partner and head of agriculture at ADM Capital, told delegates at our recent Agri Investor Australia Forum, in Melbourne.
“The US and Nordic pension funds are leaving the [Australian superannuation] industry behind,” Slim said. He explained that Australian super funds tend to get bogged down deciding which bucket agriculture investments fall under and whether they are land-focused or private equity style. “People who are slow on these decisions are really missing out on the better managers with the better investment strategies, because there is no track record for the newer strategies and the newer managers that are delivering these high returns.”
In a report published this month by Industry Super Australia, the organisation makes the case that superannuation funds can do much more in raising their asset allocation to farm assets, in line with their global counterparts. According to Driving Super Fund Investment in Australian Agriculture, industry super funds account for a very small portion of funds under management in Australian agriculture. Meanwhile, for-profit super funds hold very few or no farm investments.
In contrast, the major Canadian pension funds and New York-headquartered TIAA (as well as subsidiary Westchester Group of Australia) have invested more than $1 billion in Australian agricultural assets since 2007-08, out of total North American acquisitions in the sector of $10.3 billion, Industry Super said.
ADM, which is currently in the market with its debut agribusiness fund, Cibus Fund, held a first close in May on $100 million towards a $500 million target and hard-cap. Capital raised from the Cibus Fund will be invested across the value chain, including chemicals, producers, processors and logistics providers.
“We like investing in farm companies which have a demonstrable track record of adopting technologies to be globally cost competitive on a per production basis per unit and prove that they can export into the Asian markets and also be competitive against the Americas,” Silm said.
The firm has made 12 transactions within the agri and food sector globally, with over half of these exited, delivering a gross IRR of 26 percent, Silm added.
Investors in ADM’s funds include the Arch Capital Group, International Finance Corporation, European Bank for Reconstruction and Development and Dutch pension fund Pensioenfonds Zorg en Welzijn, according to PEI data.