In February 2018, in an attempt to safeguard the land interests of its people, the Australian Government introduced a new set of rules around the sale of its agricultural land to foreign investors. Vendors are now required to demonstrate to the Foreign Investment Review Board (FIRB) that the land to be acquired has been advertised and marketed widely to Australians for at least 30 days to give them equal opportunities to participate in the sale. Approval for proposed acquisition is also required for foreign investors with an aggregate agricultural land holding of more than AUD 15mn. This blog seeks to examine those fund managers that have invested historically or that are actively investing in Australian agriculture, identifying whether fundraising could be affected by the implementation of the new rules.
Preqin’s online platform tracks a total of 125 unlisted agriculture-focused funds that have closed since January 2009, securing $25bn in aggregate capital. Thirteen percent of these funds have had an investment mandate in Australia. The only non-Australia-based managers that have closed an agriculture fund with exposure to Australia are headquartered in the UK and the US. Collectively, they have raised an aggregate $7.0bn, more than 12x the amount secured ($565mn) by Australia-based fund managers across seven funds over the same period. The largest unlisted agriculture-focused natural resources fund closed with exposure to Australia is managed by US-based Nuveen. The vehicle, TIAA-CREF Global Agriculture II, raised $3bn and invests in agriculture in grain-exporting countries, including a 20-45% allocation to Australia.
Despite having fundraised previously, fund managers located in the US and the UK have not raised any agriculture-focused funds that seek to invest in the Australian market since 2016. On the other hand, domestic fund managers have secured $494mn since 2016. Three Australia-headquartered managers – Blue Sky Private Equity, New Harvest Investment Management and Planfarm – are actively fundraising, aiming to raise 42% ($645mn) of the total capital targeted by agriculture-focused funds with exposure to Australia. For the first time, we also see Hong Kong-, China- and Canada-based fund managers seeking commitments for such funds.
With a more diverse pool of international fund managers looking to invest in Australian agriculture, it is still uncertain if they will be adversely affected by these new rules in terms of fundraising. Fund managers are evaluated based on many factors. While 14% of investors interviewed by Preqin at the end of 2017 felt regulation would be a key issue for the natural resources asset class in 2018, our survey results also showed that regulation is not among the most important factors investors assess when selecting new funds: team track record, team strategy experience and firm track record topped the chart. It remains to be seen if managers based outside Australia can secure investments in Australian agricultural land successfully to maintain their track record and retain investors’ confidence.