AIMCo pursues diversified agriculture assets in Australia
The Alberta Investment Management Corporation (AIMCo) and its investment partner New Agriculture announced an agreement to acquire the Kimberley Cattle Portfolio last week, signifying the $124 billion Canadian pension fund’s continued pursuit of diversified agriculture assets.
The acquisition, which includes Yougawalla Pastoral Co and Argyle Cattle Co follows a public tender process, according to Jonathan Braams, infrastructure and renewable resources portfolio manager at AIMCo. A key objective was total portfolio diversification by asset class and geography, he said.
AIMCo
"We see this as a rare opportunity to acquire a large contiguous leased land base and cattle operation. It is a strong fit for our Renewable Resources portfolio because it adds significant direct exposure to livestock and further diversifies our land holdings within Australia," Braams told AsianInvestor.
The Kimberley Cattle Portfolio spans almost 3 million hectares in the Kimberley region of Western Australia. This includes seven pastoral leases and five sub-leases, as well as an agistment agreement for grazing, providing a significant boost to AIMCo's land-use diversification.
The acquisition of the Kimberley Cattle Portfolio is in line with AIMCo’s pursuit of livestock, which is one of the three core agriculture subsectors the fund has within its mandate. The other two are row crops and permanent crops.
“Once the transaction has received regulatory approvals and closes, we will implement a comprehensive plan, motivated by our long-term commitment to support and guide companies through the green transition,” said Braams.
AIMco was not able to share specific details on this plan as the transaction is still pending regulatory approval.
AUSTRALIAN AGRICULTURE
Major Canadian pension funds are increasingly turning to Australian agriculture and farmland sectors, driven by their commitment to sustainable investments and decarbonisation.
Along with AIMCo, organisations leading this trend include the Caisse de dépôt et placement du Québec (CDPQ), Ontario Teachers' Pension Plan, and the Public Sector Pension Investment Board.
“AIMCo does have significant exposure to Australia already, however, this recent investment will provide significant land-use diversification benefits due to the livestock, irrigated land, and location of the land,” said Braams.
The fund first began allocating to Australian forestry and, most recently, to agriculture through the acquisition of mixed farming business Lawson Grains in January 2022.
“We feel that Australia has some strong attributes for institutional investors that have also benefited us to date. It has a larger and less fragmented farmland size compared to other geographies, a strong history of high-quality agricultural production, strong growth rates for hardwood and softwood species, and accessible domestic and export markets,” said Braams
Australian farmland is also becoming increasingly attractive to pension funds because the asset offers stable returns and long-term growth, according to Tom Murphy, head of natural capital at investment management firm QIC.
QIC
"Australian farmland has ideal correlation characteristics to traditional portfolio assets – exhibiting negative correlations with fixed income assets and low positive correlation with international and domestic equities," Murphy told AsianInvestor.
Beyond appreciation, with a yield between 3% and 5%, it also offers a hedge against inflation, often providing returns more than double the inflation rate. Remarkably, its correlation characteristics make it an excellent diversification tool for any portfolio, he said.
Australian farmland also provides opportunities for institutional investors actively seeking nature-based investments, in the form of biodiversity, reef and carbon credits.
POTENTIAL SYNERGIES
To help manage its Lawson Grains aggregation, AIMCo and co-owner New Forests, a global investment manager of nature-based real assets, established New Agriculture in August 2022. Headquartered in Australia, its purpose was to build a portfolio of agriculture assets globally, starting in Australia and New Zealand.
New Agriculture
“New Forests has been managing agriculture as part of a forestry estate since 2010, looking at the highest and best use for that landscape underpinned by a focus on driving positive impact on the environment and communities,” Bruce King, director of New Agriculture, told AsianInvestor.
King sees the acquisition of the Kimberley Cattle Portfolio as a natural extension of what New Forests has been doing.
“Our intention is to bring the same rigour and commitment to sustainability from the forestry space and drive positive change in the agriculture sector through the adoption of certification standards, policies to reduce the impacts on the environment, and best practice in landscape management,” said King.
With the aim of building a diversified portfolio of established, quality agriculture businesses in Australia and New Zealand, and providing institutional capital to expand, New Agriculture is looking to make an impact across four key sectors—livestock, rainfed and irrigated row crops, and permanent crops.
“We consider vertical integration strategies to capture value chain margin an important aspect across these investments. Very few managers take this approach. Sustainability underpins all our investments, and we see an opportunity to be a global leader in sustainable agriculture at scale,” said King.