Buy a farm, says investment guru

10 Jun, 2012 04:00 AM

AS Europe's debt crisis rattles global equity market confidence farming is being increasingly championed by many as a sound, long-term bet for investors needing a safe haven for their money - particularly superannuation funds.

"I'd urge anyone to buy a farm," said high profile international investor and author Jim Rogers, whose rise to success included co-founding the powerful Quantum hedge fund in the US with billionaire George Soros.

Rogers, who has a keen eye for value investments and correctly forecasted the past decade's bull commodity "super cycle", strongly recommended buying agricultural investments ahead of gold.

But back on the farm it's still hard work convincing cashed-up pension funds in Australia or overseas to modify their investment strategies to take advantage of many big and small scale rural opportunities on offer.

While some big superannuation names from AMP to US-owned Westchester Group have had lengthy farm sector ties, the rush of corporate and foreign money into agriculture is not as dramatic as it seems according to those in the investment business.

"The average superannuation fund is very focused on relying on half-yearly, quarterly, even daily dividends, with a big discrimination towards liquidity," said retiring managing director of the $145 million Sustainable Agriculture Fund (SAF), Frank Delahunty.

"Agriculture is not a liquid investment. You can't easily sell in and out of farming assets.

"That's a big reason it doesn't easily fit the short-term thinking which most investment funds are skewed towards."

Investment vehicles like SAF tended to be seen more as niche ventures - despite it owning five big aggregations covering 29,000 hectares between North West NSW and Tasmania, and backed with money sourced from funds such as Auscoal, AustralianSuper, AMP and Christian Super.

Sydney-based agribusiness capital raising principal Bruce Tweedie said the story was similar for private money investment in agribusiness.

While interest was strong converting it into real spending wasn't easy.

He said bad publicity surrounding managed investment schemes, their hefty management fees and a reliance on tax refunds for dividends had hurt agriculture's investment image, further complicating the task of promoting farming to outsiders.

However, with overseas investors now burnt by dissolving equities and derivatives markets, he said interest in "real" ag assets was serious, notably from London ("they have a history of understanding overseas agricultural investment in the UK"), Shanghai, Hamburg and Toronto.

Inquiry through Tweedie Capital - which targets the $10 million to $100m investment range - leaned towards cotton and dairy enterprises, followed by grain and sheep.

Mr Tweedie's investment targets were well-run individual properties which would ideally retain their current owners as managers for the new investors.

With many families reaching a point where they must think about farm succession issues and what to do with their land it was relatively easy to find good farms to offer.

"Quite a few farmers approach us simply looking for a capital injection, but that isn't so attractive to investors," Mr Tweedie said.

"If they're putting up serious money of $10m or more they tend to want control."

SAF's Mr Delahunty, agreed that while many farmers liked the idea of getting outside capital to help them with debt recovery and expansion plans, most investors considered such arrangements more trouble than they would be worth.

"And if you're already a top performing farm business you're probably too strong minded to want to accept another major shareholder having much say."

Mr Delahunty said SAF's own strategy was following the footsteps of specialist overseas farmland management funds which had already proven that "patient capital" invested in the top 25 per cent performers was well worth the effort.

Those with runs on the board included the $2 billion Westchester - a division of a giant US teachers pension fund - which began investing in North American farmland and has owned Australian farms for 20 years.

"It's a prime example of an overseas super fund which is very comfortable with the long term returns from 400 agricultural property assets," Mr Delahunty said.

"Unfortunately our own investment sector tends to only think about property if it's city commercial real estate with the assurance of monthly rent cheques."

Reaffirming its enthusiasm for farmland in these troubled investment times Westchester's parent, TIAA-CREF recently contributed to a new $US2 billion fund buying more land in the US, Australia and Brazil.

The new TIAA-CREF Global Agriculture's backers include Swedish pension fund AP2, British Columbia Investment Management Corporation and the Caisse de depot et placement du Quebec - one of the world's largest real estate managers.

Caisse's private equity executive vice-president Normand Provost said the timing was right to diversify into farm assets and enter an "emerging asset class exposed to global agricultural product demand".

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ME Again
11/06/2012 4:53:45 AM

Might have paid to point out that Jim Rogers is an equity holder in a fund looking to raise capital for farmland in case that was a conflict of interest...
11/06/2012 9:15:42 AM

Yes Rodgers, if i had a few spare million dollars, I certainly would consider it!
11/06/2012 11:48:17 AM

Agg students entering the farm property market have no hope. Dont seem a long time ago when propertys west of the range were selling at $12 an acre
11/06/2012 1:34:44 PM

Do due diligence on the property. Be sure you find out the planting history of GM crops on the farm and how far away to your nearest GM growing neighbours. GM contracts have legal liability beyond the growing season.
11/06/2012 3:20:05 PM

The kiss of death for farm values?
12/06/2012 11:29:52 AM

Kiss of death for farm values. What are you talking about? Well seen you are from Qland. Why not sell all of Oz to the highest bidder so that people like you can make a temporary HUGE PROFIT. Then tell future agg generations you are the ones that sold out Australia's SOVERENTY for their own selfish need. All agricultural property should remain under australian ownership
12/06/2012 9:20:08 PM

Well Ranger what is "Australian Ownership"? Overseas investment has been going on for DECADES.
13/06/2012 1:15:37 PM

Mouse - not decades, but centuries.
13/06/2012 3:32:58 PM

Overseas investment does run this country!!! Now that Gina can bring in 1500 cheap labour, a precedent has been set, Foreign investors can now bring their own expertese and labour now that they have the go ahead. Hanrahan was right, we are all doomed doomed, ignored in our (previously) owned country.
john from tamworth
14/06/2012 9:39:37 AM

Actually, lone ranger, overseas investment does run the country and without it we be just another indebted, bloated welfare state.
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