WSIB commits A$350m to Laguna Bay vehicle seeking $A750m

Laguna Bay Fund 2 has a predominately Australia-focused strategy targeting row crops, permanent crops, livestock, water and aquaculture.

The Washington State Investment Board has made a commitment of up to A$350 million ($253 million; €223.9 million) to Laguna Bay’s Fund 2, which is seeking A$750 million.

At WSIB’s meeting on February 17, the $142.5 billion pension approved a recommendation by its independent consultant Mercer to include a commitment to the Laguna Bay vehicle within its tangible assets portfolio.

“The fund targets high-quality upstream and midstream agriculture investments in row crops, permanent crops, livestock, water and aquaculture, predominately located in Australia,” according to a WSIB investment advisory.

WSIB declined to be interviewed about its most recent investment with the firm, but  issued the following statement to Agri Investor: “The fund fits into the upstream and midstream agriculture segments of WSIB’s tangible assets framework, with the potential for exposure to downstream agriculture through vertically integrated agribusinesses.”

WSIB made a A$250 million commitment to Laguna Bay’s first fund in 2015.

WSIB’s $8.6 billion tangible assets portfolio constitutes 5.5 percent of the overall fund and is devoted to investments in non-financial assets with physical substance that are used in the production or supply of good and services. In addition to agriculture, the portfolio includes minerals and mining, energy and social essentials.

As of September, WSIB’s investments with Laguna Bay accounted for 2.3 percent of the Tangible Assets portfolio that also included investments with International Farming Corporation, Teays River, UBS Farmland and others.

Queensland, Australia-headquartered Laguna Bay is a food and ag focused investment firm founded in 2010. The firm typically pursues control investments in Australia or New Zealand organized under themes of rising food demand, inflation and decarbonization.

In December, Laguna Bay sold a 3,353 hectare dryland cropping property in Victoria’s Western District for A$70 million after having sold a 8,200 hectare property in the region for $A80 million in October 2020.

Earlier this month, the firm acquired the remaining shares it did not already own in Angel Seafood, an oyster producer listed on the Australian Securities Exchange, in a deal that valued the company at A$32.3 million.

In testimony submitted to Australia’s Standing Committee on Agriculture and Water Resources in October 2018, Laguna Bay chief executive and  founder Tim McGavin described barriers to investment in ag by Australian superannuation funds.

He highlighted restrictions inherent in private equity fund structures, a lack of reliable data and the fact many of the industry’s gatekeepers come from farming families whose subscale operations left them inexperienced and skeptical about what can be accomplished at a larger scale. Despite these challenges, he wrote, institutional investment in farmland can help address looming challenges facing the sector such as debt saturation and lack of opportunity for younger farmers.

“I am not a rich fund manager, we are a break-even asset management business,” McGavin wrote in the testimony that described Laguna Bay’s assets under management as then being “around $700 million”.

“If I wasn’t so passionate about Australian agriculture, I would close the doors and continue to just make money for myself without the hassle of managing money.”