Vulpes Investment Management, the family office-led fund management firm headquartered in Singapore, is launching a $500 million collective investment vehicle to invest in permanent crops globally.
Vulpes Agricultural Land Investment Company II (VALIC II) is targeting family offices and pension funds in North America, Asia and Europe and is aiming to close for the first and final time in the first quarter of 2015.
Vulpes’ founder Stephen Diggle has already committed $40 million to the joint stock company ahead of a planned acquisition of a New Zealand-based avocado operation which will be VALIC II’s first investment.
VALIC I was established in 2009 to invest Diggle’s capital directly into agricultural properties after he and Jonathan Pendock, president of Vulpes Agricultural Services, decided against investing into any of the third party funds on offer at the time as they lacked diversity and appealing fee structures.
Diggle was the sole investor in VALIC I investing around $30 million into livestock farms in Latin America, cropping in the US and permanent crops in New Zealand. VALIC I has now exited two farms in the US gaining a 55 percent total return on both, giving Vulpes an investment track record and experience in exiting agriculture investments, according to Pendock.
The firm is also planning to sell the livestock operation in Uruguay.
“The main takeaway from VALIC I was that we don’t need to invest in everything under the sun,” said Pendock. “Everything we tried in VALIC I worked but the permanent crops gave the most sustainable high returns so that’s the driving force behind our decision to take on that focus. And with inflation fears dissipating, our focus won’t be so much on capital appreciation but on yield.”
“We still believe in diversification, however, so we are investing across climates, geographies and legal jurisdictions,” he added.
VALIC II also has much loftier ambitions than VALIC I did in terms of investment size – it is targeting investments of at least $25 million compared to some of under $5 million in VALIC I, according to Pendock.
“We started small and made sure things worked. We grew and made sure things worked,” said Pendock. “Although we could make a lot in land values buying $5 million plots, we wouldn’t be able to garner any agricultural economies of scale under that strategy.”
Vulpes is awaiting approval from New Zealand’s Overseas Investment Office to acquire one of New Zealand’s largest avocado orchard businesses that accounts for around 10 percent of the country’s exports.
And the firm has a strong pipeline of deals in the waiting including kiwifruit, blueberry, nuts and avocado operations in Australasia, Chile and Europe.
“We have already done a lot of work on the pipeline in the five years of working on VALIC I so in a way the research of personnel, legal structures, tax and geopolitical risks has already been paid for,” said Pendock.
Pendock hopes to deploy all the capital raised within a year.
Vulpes is targeting a 10 percent gross annual yield excluding capital gains from land appreciation and will charge a 1 percent management fee on net asset value and a 10 percent performance fee on distributable earnings. There is no set investment term. IPOs and strategic sales are a potential exit route for each investment.
Before focusing on agriculture and German real estate under Vulpes, Diggle co-founded Artradis, one of Asia’s largest hedge funds which closed in 2010. VALIC I and II were launched on the same platform.