Private Equity Funds Investing in the Agriculture Sector – September 2014

by Kamarl Simpson

  • 05 Sep 2014
  • PE
  • NR

Following the news of food- and agriculture-focused Paine & Partners Capital Fund IV having raised more than half the capital towards its $850mn target, this blog will draw on Preqin’s Funds in Market data to examine the agriculture private equity fundraising environment.

Alongside the world’s ever-increasing population, the farming sector has seen considerable growth in demand for crops, which creates the need for increased production. As a result, some private equity players look to take advantage of the disparity between demand and supply and capitalize on potential investment opportunities. A number of agriculture-focused private equity fund managers typically make investments in the sector by acquiring and upgrading production on existing farmlands or converting pasture land into crop land; some may look to invest in agriculture technologies that improve the efficiency of crop production.

Preqin’s data reveals there are currently 34 primarily agriculture-focused private equity funds in market seeking almost $14bn in aggregate capital. An additional 97 funds that consider agricultural deals as part of a broader industry focus are on the road aiming to raise $33bn.

Regions outside of North America, Europe and Asia appear to be particularly attractive to managers raising agriculture-focused funds. Five funds currently in market are targeting agricultural investments across more than one Rest of World Region, primarily Latin America and Australasia, seeking an aggregate $5bn. Another seven funds are collectively aiming to raise $2bn solely for Latin America-based deals, and five vehicles are looking to raise $1.3bn for investing in Australasia.

A total of eight agriculture-focused funds have reached final close in 2014 YTD, having secured the same amount of capital raised by such funds throughout the whole of 2013 ($1.1bn). Although fundraising in 2014 is unlikely to reach the peak seen in 2007 when $3.3bn was raised via six fund closes, it is encouraging to see that 10 funds in market have held at least one interim close, securing an aggregate $1.8bn so far.

TIAA-CREF Global Agriculture II is the largest agriculture fund currently in market. The fund managed by TIAA-CREF Asset Management held a first close in July 2014 having secured $1.4bn towards its $3bn target. The fund looks to achieve diversification by crop type and geography, investing across the US, Australia, Brazil, Chile and New Zealand. Excluding this fund, which has secured 47% of targeted capital at first close, the remaining agriculture-focused funds in market have achieved only 27% of targeted capital on average at first close, which is slightly less than the 38% average across the whole private equity industry.

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