July 15, 2016

15/07/2016: Global institutional capital investments in farmland top US$45 billion over last decade, HighQuest Consulting reports

A just-published white paper – Agriculture: A new asset class presents opportunities for institutional investors – from HighQuest Group’s globally-recognised advisory experts details farmland as growing asset class. 
This investable universe in farmland is more than three times the size of that for timber, with investments that have been growing annually at 8 to 10 percent, according to the paper. 
Philippe de Lapérouse
The paper, authored by Philippe de Lapérouse, managing director and head of HighQuest Consulting, highlights a number of different vehicles, including alternative real asset funds, private equity and venture capital that institutional investors can consider for allocating capital into agriculture. It also makes a strong case for investing in food and agriculture by tailoring a portfolio to meet return and risk objectives, allocating investments across three key variables: geography, production type and operating model.

Interest in this asset class is evidenced by high profile investor groups such as TIAA, which in November 2015 raised a US$3 billion fund that included internally-generated funds as well as limited partnership contributions from peer institutions. This fund and others are making substantial commitments in the sector, acquiring farmland and/or managing leaseholds in various regions around the world such as North and South America, Australia and markets in Eastern Europe and in Sub-Saharan Africa.

“While farmland investments have been an integral part of the portfolios of wealthy individuals and families for centuries, in the current economic environment this asset class is attracting renewed interest from a wide range of institutional investors seeking alpha returns with inflation protection, which do not correlate with other paper assets and provide increased wealth protection during a period of market uncertainty,” said Mr Lapérouse.

“These long-term fundamentals combined with historically uncorrelated returns generated by farmland investments make this an attractive asset class for the portfolios of many institutional investors.”

Mr Lapérouse outlined the key attributes the sector provides that are attracting interest among institutional investors:
  • strong long-term fundamentals based on secular trends (climate change, increased urbanisation and rising GDP in emerging markets)
  • attractive historical returns (based on a mix of current income and capital appreciation)
  • uncorrelated returns with other financial instruments
  • a strong inflation hedge, and
  • preservation of capital.
Additional investment opportunities exist along the entire value chain, said Mr Lapérouse, from upstream inputs of products and services to downstream inputs of transportation, logistics and value-added efficiency and risk management processes.

Read more and download the full white paper HERE.

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