March 7, 2022

By Lynda Kiernan-Stone, Global AgInvesting Media

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, Kilter Rural manages 12,000 hectares of farmland across northern Victoria and has more than A$300 million (US$220 million) in funds under management. 

Today, the announcement has been made that Kilter Rural’s Australian Farmlands Fund was closing with capital commitment totaling AUD$65 million (US$47.6 million). 

 The Australian Farmlands Fund was launched in 2019 by Kilter Rural following Sydney-based Regal Funds Management reportedly acquiring a stake in the farmland and water rights asset manager.

The fund was 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. This strategy is directly in Kilter Rural’s wheelhouse, and one which aligns with what Cullen Gunn, CEO of Kilter Rural, calls “tectonic shifts in the way capital was being deployed…”

Angus Ingram, investment manager with Kilter Rural, noted in “Investment Resilience and Adaption to a Changing Climate” published in GAI News in February 2020, “In the Australian states of Victoria and New South Wales, up to 70 percent of the primary terrestrial ecosystems that existed prior to European settlement have been cleared, replacing native ecosystems with intensive farming. In Australia’s irrigation areas specifically, most of this development occurred after the World Wars, and there remains significant underinvestment in farmland and water assets in Australia’s major irrigation food bowl, the Murray Darling Basin (MDB).”

Ingram continued, “The MDB represents only 14 percent of Australia’s land area yet generates 32 percent of Australia’s gross agricultural production, of which 37 percent is generated through irrigated agriculture. It is home to 40 Aboriginal nations and more than 90 species of waterbirds alone. It is therefore critically important that its natural resources and cultural heritage are managed sustainably.”

Under this mission, the fund regenerates soils and farming systems resulting in sustainable food production, scaled bio-diversified reforestation, and carbon sequestration. 

With a targeted 50/50 split between farmland and water investments, the fund, which is the only agricultural fund in Australia certified with the Responsible Investment Association Australasia, is aiming for a net IRR of 10-12 percent from a portfolio of a dozen properties and approximately 4,000ML of water entitlements.

“The growing support Kilter Rural is achieving from the investment community both here and internationally illustrates that firms such as Kilter Rural that are part of the transition to a low carbon future can gain significant investor support, be a part of the solution and still make great returns,” said Gunn.

Kilter Rural also has two open-ended Water Investment fund – the Kilter Water Fund, which has posted 15 percent-plus annualized returns, and the Balanced Water Fund, which is an environmental impact investment fund managed in partnership with The Nature Conservancy, and which is on pace to deliver one of Australia’s largest private water donations this financial year. 

“…the adoption of regenerative agricultural practices provides a real opportunity for agriculture to play a significant role as a climate change solution,” wrote Ingram. “Regenerative agriculture is about producing more with less whilst delivering positive transformational change to the supporting environment. Its principles lie in a focus away from a traditional extractive, chemical intensive approach towards building soil and the terrestrial ecosystem health.”

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 – Lynda Kiernan-Stone is editor with GAI Media, and is managing editor and daily contributor for Global AgInvesting’s AgInvesting Weekly News and  Agtech Intel News, as well as HighQuest Group’s Oilseed & Grain News. She can be reached at lkiernan-stone@globalaginvesting.com.