University of Michigan Regents mulls $30m agri investment

Low competition and high barriers to entry into agriculture make AMERRA's specialised strategy a strong bet, the University of Michigan Board of Regents' CFO has written.

The University of Michigan Board of Regents is considering a $30 million commitment to Latin American agriculture with AMERRA Capital Management.

The endowment will decide whether to commit the funds to AMERRA Agri Fund III’s secured debt-focused strategy in Latin American agribusiness at a board meeting on 16 June.

The fund, which launched in 2015* and has raised $97 million to date according to SEC filings, is targeting $750 million. Investors include Maine Public Employees Retirement System and Texas Municipal Retirement System, according to PEI Research & Analytics.

A tightening credit environment and high barriers to entry in the agricultural sector favour AMERRA’s strategy, the board’s chief financial officer Kevin Hegarty wrote in a recommendation:

“Publicly available information on agriculture companies is limited, requiring deep networks to access deal flow and evaluate opportunities,” he wrote. “AMERRA has a deep understanding of the agribusiness and will directly … source deals through its extensive local network and on the ground presence.”

Agri Fund III specialises in senior-secured, fully collateralised high-yielding, low-duration agribusiness loans.

The firm’s Agri Fund III is primed to benefit as a source of capital as major banks lend less to comply with changes to risk-weighted capital requirements in the Basel III regulations, Hegarty wrote.

However, the firm has shown an increased interest in private equity acquisitions and geographic exposure beyond Latin America. It acquired European aquaculture company Andromeda Group for an undisclosed sum in May, and hired two private equity executives at the beginning of 2015; former J D Heiskell executive Robert Hodgen and aquaculture investor Thor Talseth.

The University of Michigan endowment had $10 billion in 2015. It invests in alternative assets including private equity, real estate, and infrastructure, with current commitments to more than 200 private equity funds, according to PEI Research & Analytics.

AMERRA was launched as a joint venture between investment manager M D Sass and Macquarie Financial Strategies in 2009 to provide financing to agriculture and metal companies in the Americas. It has $1.5 billion assets under management.

The firm did had plans to launch a pure equity agri-focused fund, as reported by Agri Investor in 2015. However, AMERRA representatives have declined to comment on whether a launch is imminent, citing SEC regulations prohibiting marketing of funds.

This article has been corrected. It originally said that Fund III was launched in 2014. The fund was launched in 2015.