August 20, 2018

By Patrick Adefuye, Preqin

Assets under management of unlisted agriculture/farmland-focused natural resources funds have grown exponentially in the past 10 years, from $3.8B in December 2007 to $31B as at September 2017. The sector has attracted increased institutional investor interest as investment opportunities have arisen, driven by global population growth.

Since 2008, 130 agriculture/farmland-focused funds have successfully raised capital from investors, securing an aggregate $26B (as at April 2018). Much of this capital was raised by North America-focused vehicles, which account for 30 percent of funds closed and 38 percent of capital raised.

The largest ever agriculture/farmland-focused vehicle closed is Nuveen’s TIAA-CREF Global Agriculture II, which held a final close in July 2015. The fund mainly invests in grain-exporting countries and employs a top-down strategy primarily focused on achieving diversification by geography and crop type, but also by operating strategy and water profiles.

Momentum in fundraising has slowed in recent years, following two successive years of growth between 2013 and 2015, culminating in a record annual amount raised of $5.6B: despite this initial growth, annual fundraising declined to $1.5B in 2017.

However, dry powder also declined from $11B to $9.7B between 2016 and 2017, implying that fund managers are focusing on putting the capital raised in previous years to work.

Fundraising in 2018 so far has already secured 40 percent of the total in 2017. There are also 41 vehicles in market seeking a total amount of $8.2B from investors. Just over half of these have held interim closes, raising an aggregate $2.2B. The largest agriculture/farmland-focused fund in market is Tillridge Global Agribusiness Partners’ Tillridge Global Agribusiness Partners II fund, which is seeking $750M. The fund will target US-based agribusiness assets within the supply chain inclusive of storage, distribution, marketing, processing, services and packaging. Preqin’s survey of institutional investors in December 2017 revealed that a quarter of investors felt agriculture/farmland presented the best opportunities for investment in 2018, compared with 16 percent that felt so in December 2016, suggesting that prospects are better for managers fundraising in 2018. Preqin tracks 754 investors that have a preference for agriculture/farmland funds.

Fifty-one percent of the funds seeking capital and 56 percent of capital sought are for North America-focused vehicles, suggesting that the concentration of activity in this region is set to continue. President Trump’s infrastructure plan specifically includes plans for rural U.S. –  a boon for agriculture/farmland investors in the region due to the prospect of improved efficiency, particularly in transportation. This could provide the North American agriculture/farmland industry with a much-needed boost to potential profitability and global competitiveness.