Schroders To Launch Ag Land Trust
8 July 2008 Subject to regulatory approval, Schroders will launch a closed-ended Agricultural Land vehicle in September 2008, which will feature global investment in agricultural land related equities and commodities.
Around 75%-80% of the fund’s investments will be in vehicles that own or are buying land and will benefit from capital appreciation, with the remaining 20% -25% to be in equities and commodities. Investment criteria includes targeting prime land where there is an opportunity to improve returns through modern farming practices. Initial asset allocation is split 32% in EU countries, 15% South America, 13% Australia, 9% Ukraine, 7% Russia, 6% each in Canada and commodities, 4% inputs, 3% management, and 2% each in equipment and Africa.
Global Head of Research for the firm, Mark Bridgeman, who spent the past 12 months looking at how to obtain exposure to land assets, will run the fund. Although Bridgeman believes that global demand for land makes it an attractive investment opportunity over the long-term, he concedes that there are many challenges to overcome. Said Bridgeman: “The world needs to double food production over the next 30-40 years and there are similar pressures on land use from industrialisation, climate change, and urbanisation. As developing worlds become richer, the more they consume and on top of that the world’s grain stocks are at 40-year lows. Severe weather conditions such as heavy rain or droughts have also applied more pressure on supply.”
Possible investments include a Romanian product that is aggregating land from very small parcels into units that are commercially viable, and a Canadian product that buys land to create larger industrial farming units. Bridgeman will move higher up the risk spectrum by investing in frontier countries but will also back opportunities in first world regions.
Bridgeman will be externally advised by an as yet unnamed global agricultural expert, assisting him on the due diligence. He will also use research from the property, agricultural equities, and agricultural commodities teams at Schroders.
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