VicSuper open to growing agri portfolio abroad – Exclusive

The superfund is open to increasing its agri portfolio at home or abroad, its chief executive tells Agri Investor.

Victorian Superannuation Fund chief executive officer Michael Dundon told Agri Investor he has ruled out any further greenfield agri acquisitions, but that his fund is open to investing in an established operation elsewhere in Australia or abroad.

The fund began investing in its Future Farming Landscapes project near Bendigo in Victoria in 2007, where with managers Kilter Rural it has developed about two thirds of acquired arable land and implemented large-scale water irrigation infrastructure.

Water and land are held separately in Australia, allowing water rights to be traded and water title holders to sell on additional water to other irrigators. Dundon said that continuing to develop the project would take up the fund's full attention when it comes to agriculture for at least another year.

“We have plans this financial year to do another 700 or 800 hectares of irrigation development, so the next two years will probably see us get close to having all of the arable land fully developed,” said Dundon, adding it would take a further year or two to have crop rotations fully established and the Future Farming Landscapes project to reach a “peak in terms of development”.

But Dundon said that despite strong returns from the water side of the project, the challenges of aggregating land and the limited size of the Victoria water market meant that any new agri investments would be directed towards a different strategy.

“I wouldn’t rule out looking at other investment opportunities,” said Dundon. “But for us it would be more about broader geographic and commodity diversification. Rather than continue to invest in that region [Victoria], I think we would be looking for something global or elsewhere in Australia.”

Dundon said that any new acquisition over the next two-to-three years would be opportunistic, and that either the fund’s alternative asset or real assets allocations could house it, “depending on how it is structured”.

“There are opportunities in Australia in broad acre farming, but also in beef cattle and other commodities,” said Dundon. “We might look at those opportunities across Australia, and there seem to be opportunities starting to emerge in Europe, Eastern European countries and even in America in terms of broad acre and other commodities.”

Earlier this year, local government-owned manager Queensland Investment Corporation bought an 80 percent interest in the North Australian Pastoral Company for the Queensland’s Long Term Asset Advisory Board and the UK’s Pension Protection Fund.

Phillip Cummins, global private equity principal for Australia’s Queensland Investment Corporation (QIC), told Agri Investor that it took three and a half years to find and close the direct investment into primary agriculture.

QIC specifically avoided a strategy involving aggregating parcels of land to build up an agri investment from scratch, instead targeting a company in which it could build on scale and manage directly.

While VicSuper could look for a similarly-styled deal with strong management in place, Dundon said that with the help of international consultants, buying agri assets on a global level could be a good way to diversify the fund’s portfolio.

“We have a reasonable level of timberland as well, and that is global, rather than domestic. So we are not afraid to look at these things,” said Dundon.

But he shied away from saying any new investment in the agricultural sector was certain.

“It could be a bit opportunistic as well, rather than something we desperately chase,” he said.