TIAA-CREF, the Teachers Annuity Insurance Association-College Retirement Equities Fund, has closed its second global agriculture real assets fund at $3 billion, the financial services group announced in a statement.
TIAA-CREF Global Agriculture II, which held a close in June at $1.7 billion, has exceeded its initial target by $500 million, according to the statement.
The new fund helps to further diversify TIAA-CREF's alternative investments beyond the public markets, TIAA-CREF Asset Management senior managing director Jose Minaya told Private Equity International. It has moved several of its strategies to more direct investments, he added.
“This is a hybrid investment [fund] with a very long-term horizon that allows us to both 'clip a coupon' and realise capital appreciation with low volatility,” said Minaya, who is also head of private markets.
TIAA-CREF, which manages $869 billion in assets and also invests as a limited partner, began raising its new fund in July 2014, just over two years after it closed its TCGA I at $2 billion, $500 million above its target amount.
“As it relates to our private markets strategy, the agriculture asset class is incredibly important because it allows us to become more diversified in investments that are not correlated to the stock or bond markets yet are positively correlated to inflation,” he said.
The new fund will typically make investments of $40 million to $50 million to acquire farmland in North America, South America and Australia, with some transactions expected to total up to $200 million. Its hold period is up to 20 years and the fund is expected to yield low double digit returns, Minaya said.
Its 20 investors include Swedish pension fund AP2 that committed $750 million, Cummins UK Pension Plan Trustee, Environment Agency Pension Fund, the Greater Manchester Pension Fund and the New Mexico State Investment Council that committed $200 million, as reported by PEI sister publication Agri Investor.
The fund's assets will be managed by Westchester, a majority-owned subsidiary of TIAA-CREF.