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Greener Pastures for Agriculture-Focused Private Equity Fundraising – September 2015

by Luke Goldsmith

  • 28 Sep 2015
  • PE
  • NR

With an ever growing global population, which is expected to exceed nine billion by 2050, there is increasing demand for food. This has led to a demand and supply issue with the need for agriculture and farming putting strain on current levels of production. Private equity, therefore, could have a big role to play in order to unlock potential and add value where it is needed.

Preqin’s Funds in Market online service shows that 2014 was a record-breaking year for agriculture-focused private equity fundraising in terms of capital raised, with 2015 already topping these levels, as shown in the chart above. Fifteen funds raised $3.1bn in aggregate capital commitments last year, and despite the fact that only four funds have been raised so far this year, they have collected an aggregate $3.4bn. The 2015 YTD fundraising total has been greatly helped by the close of TIAA-CREF Global Agriculture II, the largest agriculture-focused fund ever raised. The fund reached a final close on $3bn in July and mainly invests in grain-exporting countries; the fund employs a top-down strategy, and is primarily focused on achieving diversification in geography and crop type, but also operating strategy and water profile.

In 2014, North America-focused funds raised the largest amount of agriculture-focused capital, contributing 55% of all capital collected over the year. The largest agriculture-focused fund to close in 2014 was Paine & Partners Capital Fund IV, reaching $893mn in December. The focus of the fund’s investments is midstream assets such as food processing, agricultural inputs such as seeds, as well as fertilizers, animal health and technology such as drip irrigation.

Europe-focused agriculture fundraising seems to be on the periphery of global agriculture private equity fundraising. From 2008 until present, there have only been four agriculture-focused funds closed with a regional focus on Europe. In this same time period, funds focusing on multiple regions throughout the rest of the world have collected 34% of capital, compared with just 3% by Europe-focused vehicles.

There are currently 31 funds in market focused on making agriculture investments, targeting an aggregate $8.2bn. Funds focused on Latin America & the Caribbean are targeting $1.9bn, the most of all regions. However, the largest fund currently raising capital is Russian-Thai Investment Fund, a joint venture between the Russian Direct Investment Fund and Charoen Pokhand Group to invest into the Russian agriculture sector, which is targeting $1bn.

Overall, it seems that although capital aimed at agriculture investments still only makes up a small percentage of total private equity fundraising, there is an increased awareness of the need for agriculture, with more capital being targeted at this sector year-on-year, as reflected in Preqin’s fundraising figures.

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