Local investors overlook agriculture to their own detriment
Local institutional investors aren’t getting around emerging opportunities in Australian agribusiness, despite the country’s environmental practices, food safety, and close proximity to booming Asian population growth making it an appealing investment.
The gross value of Australian production last financial year was $50 billion, of which $50 billion were exports, while median prices for farmland had grown on average 6.6 per cent annually for the last two decades.
Despite this, the larger Canadian, UK and US investment funds were bigger investors in Australian agribusiness than local institutions. The superannuation industry, for example, was underweight in local agriculture, with Industry Super Australia citing funds’ total allocations at 0.3 per cent.
National director of Cushman and Wakefield Agribusiness, Richard Brookes, speaking at the Property Funds Association Conference in Hobart this week, said that while there were some good reasons for the under-allocation, the combination of yield via income from farming activities and capital growth meant that it was still a missed opportunity for investors.
“Challenges include a lack of nimbleness and a lack of information. Investors often go big in one sector, and risk being heavily exposed to one industry, whereas most family farmers understand the need to diversify,” he said.
Some institutional investors had some success partnering with large family operators, hoping to overcome this issue by leaving family management, who already had expertise in the investment, in place.
Brookes warned however, that choosing the right partners was crucial if going down that path.
“Institutional investors who are successful in agribusiness are good at going and finding the best producers once they have decided the industry they wish to invest in, whether it’s cattle or cropping. They have strong due diligence around who they partner with.”
Recommended for you
Perpetual has seen AUM rise 6 per cent in the last quarter but the departure of a longstanding JOHCM fund manager led to outflows of $2.2 billion from his strategy.
Global fixed income fund Bentham Global Opportunities has been added to several major platforms, enabling it to be accessed more easily by financial advisers.
Following yesterday’s news about First Sentier Investors closing four investment teams, a second global asset manager has announced it is closing its only dedicated Australian fund.
As ASIC chair Joe Longo pushes firms to prepare for the upcoming mandatory climate disclosure regime, what skills are necessary if firms are looking to expand their ESG teams?
