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Prequin: Agriculture Funds to Raise over $3.9bn in 2015 Surpassing 2014 Volumes

November 25, 2015

Agriculture-focused investment funds have raised $3.87 billion so far this year, already surpassing the $3.86 billion raised during 2014, according to data provider Prequin.

The data, which is showcased in Prequin’s recent special report on Natural Resources, includes funds offering access to farmland, agribusiness and agtech assets that have closed this year.

A further 36 funds targeting $7.5 billion are still in the market, according to Prequin.

While this year’s figure highlights the growing interest in the sector from the global investment community, it was reached by just nine funds compared to the 17 which contributed to the 2014 total. TIAA-CREF Global Agriculture II, the US, Brazil and Australia-focused farmland fund, dominates the data after it closed on $3 billion in July, breaking the record for the largest farmland fund.

TIAA-CREF attracted investment from some large US and UK pension plans including Swedish pension AP Fonden 2, Cummins UK Pension Plan Trustee, UK pension Environment Agency Pension Fund, Greater Manchester Pension Fund, New Mexico State Investment Council and the TIAA general account.

And TIAA-CREF’s vehicle was much larger than the second largest so far this year; ACM Permanent Crops Fund, a vertically-integrated private equity fund, which closed on $250 million in January. This is a much more common size for a farmland fund and is impressive for a first-time fund.

Canadian asset manager Brookfield could reach the second spot if it closes its $700 million Brazil AgriLand Fund II before the end of the year; it was expected to reach a first close on $500 million over the summer after attracting commitments from US pension funds New Mexico State Investment Council and Oregon Public Employees Retirement Fund.

Both TIAA-CREF, Brookfield and other farmland funds in the market can now take advantage of an increasing understanding and knowledge of farmland investing by pension funds, some of which are now making their second and third commitments to the sector. New Mexico State Investment Council is one example, as the fund has made two farmland fund investments this year alone. Local peer New Mexico Educational Retirement Board (NMERB) is another fund with multiple agriculture investments, as are Swedish pension funds AP Pension 1 and AP Pension 2.

The existence of these more experienced pension investors is enabling farmland fund managers to move the conversation forward; introductory and educational meetings about the sector have largely dominated asset manager interactions with investors.

The data also reflects the increasing demand more generally for natural resources investments —  often labeled Real Assets within pension fund portfolios. Natural resources, which include energy, timberland, metals & mining and water, gained popularity as institutional investors sought diversification and less correlation with the listed equity and bond markets in the wake of the global financial crisis.

Agriculture technology funds also featured in Prequin’s report with Cultivian Sandbox‘s Food & Agriculture Fund 2 taking the number five spot after holding a final close on $114 million in February. The fund has been busy deploying capital since 2013 and is now close to full deployment which could see the fund manager hitting the road for a third fund during the first half of next year, AgFunderNews learned.

It’s been a good year for agriculture technology investment overall as companies in this space are set to raise nearly double 2014’s volumes. AgFunder’s midyear report detailed some $2.06 billion of investment during the first six months of the year, compared to the $2.36 billion recorded during the whole of 2014.

While typically a less active portion of the agriculture investment market, in fundraising and deployment, agribusiness private equity investment beyond the farm gate is increasing. While the number of dedicated agribusiness funds remains low, some new funds are popping up such as Blue Road Capital’s buyout fund which is reported to be targeting $500 million. The fund, which counts NMERB as an investor, invested into Vanguard International, a fruit and vegetable producer, earlier this year. And big-name players such as KKR continue to track and invest in the sector. Leaders in the segment, namely Paine & Partners, are also raising larger funds; Paine & Partners closed Fund IV on $893 million at the end of 2014, in the largest fundraising effort for agribusiness PE on record.

Agriculture funds are the most geographically diverse of the natural resources sectors, according to Prequin, which tracks 140 agriculture funds in its natural resources online data service. Some 37 percent of funds in the database count the US as their primary focus geography for investment, closely followed by multi-regional funds, such as TIAA-CREF II. Asia is the next most popular destination with 11 percent of assets, followed by Australasia with 7 percent.

Top Five Agriculture Funds in 2015

Fund Fund Manager Final Size (m) Final Close Firm Headquarters Geographic Focus
TIAA-CREF Global Agriculture II TIAA-CREF Asset Management $3,000 Jul-15 US Australia, Brazil, Chile, New Zealand, US
ACM Permanent Crops Equilibrium Capital Group $250 Jan-15 US US
New Zealand Dairy Fund I Southern Pastures NZ$315 Feb-15 New Zealand New Zealand
Homestead Capital USA Farmland Fund I Homestead Capital $173 Jul- 15 US US
Cultivian Sandbox Food & Agriculture Fund II Cultivian Ventures $114 Feb-15 US Global, US

Source: Prequin

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