The White House Rural Council, alongside the US Department of Agriculture and other federal agencies, is hoping to harness institutional capital in the newly-established the US Rural Infrastructure Fund, a public-private investment fund aimed at financing infrastructure projects in rural America.
The new fund was announced at the first ever White House Rural Opportunity Investment Conference in Washington DC yesterday as part of an initiative to encourage private investment into the rural sector and also to create jobs; President Obama’s “Made in Rural America” export and investment initiative.
To kick start the project CoBank, a national cooperative bank and member of the Farm Credit System, has committed $10 billion to the fund to be used in the form of loans issued directly to infrastructure projects. These projects will include hospitals, schools and other educational facilities, rural water and wastewater systems, energy projects, broadband expansion, local and regional food systems, and other rural infrastructure, according to a press release.
The fund will also attract capital from other private investors and will particularly target institutional investors such as pension funds, endowments and foundations. It will be managed by Capitol Peak Asset Management, an investment manager with offices in Colorado and Washington DC. But USDA will identify potential projects alongside other federal agencies.
“As anchor investor, CoBank has made a commitment to allocate $10 billion of its balance sheet capacity for this initiative,” a CoBank spokesperson confirmed in an emailed statement to Agri Investor. “The independent fund manager, Capitol Peak Asset Management, will also raise additional capital from institutional investors. That capital will be deployed on a case-by-case basis but will also primarily be in the form of loans to projects. CoBank and the other fund investors will earn returns as principal and interest are repaid by borrowers.”
The fund will provide flexible investment options for investors, according to the press release. “In some cases, projects may be funded entirely through private sector dollars. In others, private dollars may be leveraged with and extend critical government loan and grant programs,” read the release.
This new fund follows the recent establishment of the Farm Credit Fund, a private equity agribusiness fund managed by Advantage Capital Partners, and in which CoBank also invests as part of a consortium.
Robert B. Engel, CoBank’s chief executive, noted in a statement that this new USDA fund was in line with the bank’s objectives on financing rural projects: “It will enhance access to capital for a wide array of vital infrastructure projects around the country and speed up the process of rural infrastructure improvements. It is completely aligned with our mission of service to rural America, and we believe it represents a meaningful long-term growth opportunity for CoBank and our partner organizations in the Farm Credit System.”
The USDA also created a $150 million Rural Business Investment Company in April to help facilitate private investment into small, innovative agriculture-related businesses and there are more vehicles like this in the pipeline, he said in a press release.
“Meeting the world’s needs for food and farm products, as well as the growing demand in areas like renewable energy, local food, and the bioeconomy will require continued investment in rural places,” said Vilsack. “Many major investors in urban centers aren’t always aware of the significant investment opportunities in rural communities. If the White House Rural Council can help facilitate even a small portion of the enormous amount of available investment capital into rural places, we can grow key industries and create jobs in rural and urban areas from coast to coast.”