The launch of Pantheon’s separate accounts business for real assets including agri and timber highlights the continuing need for more institutional-grade middlemen in the agri investment market.
Agri Investor’s most popular story last week was the launch of Pantheon’s real assets separate account business. The alternatives fund of funds house has responded to requests from clients to help increase their exposure to agri, timber, metals and mining.
Pantheon is not going to launch a fund of funds to service this demand, but instead advise clients on the funds out there on an opportunistic basis, helping them to build their own portfolio. The firm also plans to supplement these fund commitments with co-investments and secondaries, the latter being a market that Pantheon’s global head of infrastructure and real assets Kathryn Wilmes believes is just two years away.
There are a couple of things to take away from this move by Pantheon that can be applied to the agri market specifically, but also more generally across alternative assets.
A move away from fund of fund investing. Loathe to pay a double layer of fees and invest into a blind pool of blind funds, institutional investors across the alternatives investment market are increasingly keen on mandating separately managed accounts, my colleagues at PEI’s other publications tell me.
And, as I’ve written about before, this is particularly relevant for agri where standard fees for funds are still being ironed out and on occasion are too high for the returns on offer, making a double fee structure even less attractive.
Pantheon’s move also highlights a gap in investment consultant offerings which one investment consultant told me she was aware of this week. Through discretionary mandates in other asset classes, investment consultants do find and invest in funds on behalf of investors with varying degrees of control. But until now, their input in agri and timber has been limited to agri fund research and general portfolio advice.
I’ve written about the lack of investment consultants before and while I still think the larger consultancy firms have some way to go in terms of their agri offering, there are several independent consultants operating in this space that could help investors identify funds for a portfolio. But most of them focus on helping the GP with acquisitions and strategy and few are positioned to respond to institutional demand as Pantheon’s reverse inquiry implies.
As institutional investors continue to educate themselves on real assets, there will continue to be a need for middlemen to help them develop exposure for the first time. To take advantage of this information gap, consultants and big managers should follow Pantheon’s lead and start offering these services sooner rather than later. It won’t be long before several institutions want to do it all themselves.
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