VicSuper open to expanding agri portfolio abroad – exclusive

Victorian Superannuation Fund chief executive Michael Dundon has told Agri Investor his fund is open to investing in an established operation in Australia or abroad.

VicSuper’s sole agri investment is in its home state, where it has aggregated land and built irrigation. But Dundon said that despite strong returns from the water side of the project, the challenges of accumulating land and the limited size of the Victoria water market meant that any new agri investments would be directed towards a different strategy.

“I wouldn’t rule out looking at other investment opportunities,” said Dundon. “But for us it would be more about broader geographic and commodity diversification. Rather than continue to invest in that region [Victoria], I think we would be looking for something global or elsewhere in Australia.”

“There are opportunities in Australia in broad acre farming, but also in beef cattle and other commodities,” said Dundon. “We might look at those opportunities across Australia, and there seem to be opportunities starting to emerge in Europe, Eastern European countries and even in America in terms of broad acre and other commodities.”

Dundon said that with the help of international consultants, buying agri assets on a global level could be a good way to diversify the fund’s portfolio.

“We have a reasonable level of timberland as well, and that is global, rather than domestic. So we are not afraid to look at these things,” said Dundon. But he shied away from saying any new investment in the agricultural sector was certain.

Dundon, who joined the A$15.34 billion ($11.64 billion; €10.41 billion) fund in 2012, said that any new acquisition over the next two to three years would be opportunistic, and that either the fund’s alternative asset or real assets allocations could house it.

Local government-owned manager Queensland Investment Corporation specifically avoided a strategy involving aggregating parcels of land for its recent agri investment and instead bought a 80 percent interest in the North Australian Pastoral Company, a company it could manage and scale.

VicSuper did make an aggregation play: its Future Farming Landscapes project near Bendigo in Victoria in 2007, where with manager Kilter Rural it has developed about two-thirds of its arable land and implemented large-scale water irrigation infrastructure. Water and land are held separately in Australia, allowing water rights to be traded and water title holders to sell on additional water to other irrigators. Dundon said that continuing to develop the project would take up the fund’s full attention when it comes to agriculture, at least for another year.

“We have plans this financial year to do another seven or 800 hectares of irrigation development, so the next two years will probably see us get close to having all of the arable land fully developed,” said Dundon, adding it would take a further year or two to have crop rotations fully established and the Future Farming Landscapes project to reach a “peak in terms of development”.

VicSuper allocates less than 20 percent of its total assets to alternative investments which include private equity, private real estate and infrastructure funds, according to PEI Research and Analytics.