January 9, 2019

As the foundation for a joint venture, Sydney-based Regal Funds Management has reportedly acquired a stake in farmland and water rights asset manager Kilter Rural.

Together, there are expectations that the two will soon be launching The Australian Farmland Fund, a new fund that has already raised cornerstone capital of $20 million, and which is expected to be opening initial third-party capital raising next month.

Founded in 2004 with an initial investment of $175 million from Vic Super, Kilter Rural is self-described as “a specialist manager, dedicated to investment in Australian real assets of farmland, water, and ecosystem services”. Currently the group manages $214 million in investments, and as of February of 2018, had a portfolio of 38 farms totaling 9,000 hectares growing irrigated cotton, organic wheat, organic barley, organic soybeans, tomatoes, various stone fruit crops, and hay, as well as 64 gigaliters of high and low-security water.

Throughout its holdings, Kilter Rural has installed 12,000 kilometers of sub-surface drip irrigation, fitted with sensors that enables Kilter to grow a hectare of cotton using only 7.5 megaliters of water, and has pursued a system of crop rotation with the goal of improving soil health.

“Our aim has been to invest in irrigation infrastructure, manage water and soils and put aside land of environmental value to improve it, as well as deliver on returns for investors,” Michael Neville,  GM Farmland and Ecosystems with Kilter Rural, told Weekly Times Now last February.

Neville went on to state that Kilter Rural’s farmland investments were in the process of transitioning to higher value crops through the introduction of organic production  begun in 2016.

Already accounting for the production of approximately 30 percent of Australia’s tomato crop, Kilter Rural also is expanding into intensive horticulture, earmarking 250 hectares last year to begin growing organic broccolini.

Founded by Andrew and Phillip King, also in 2004, Regal Funds Management’s maiden fund was the Atlantic Absolute Return Fund, which has in the years since averaged 31.7 percent per year, and has twice been named the Australian Hedge Fund of the Year.

More recently, Regal Funds has deviated from its usual strategies, launching two Emerging Companies funds – the first in 2016, and the second in 2018. Both focus on pre-IPO investments, unlisted expansion capital, and listed microcap investments, and each are closed-end funds with a five-year term and a one-time subscription date, according to the company’s website.

The soon-to-launch Australian Farmland Fund has been established as a vehicle to invest in capital constrained farmland assets that are under-utilized or are in need of development, and water assets with access to irrigation – a strategy that is directly in Kilter Rural’s wheelhouse.

“Our key metric is return per megalitre to measure the performance of crops, because water is the most expensive input,” Neville told Weekly Times Now. “We are all about trying to stabilise [sic] that return to the investor each year.”

-Lynda Kiernan