Growth Farms' lease fund finds cornerstone investor
Financial planning firm, Providence Wealth has made a substantial investment in Growth Farms Australia’s new farm leasing fund, the Australian Agricultural Lease Fund (AALF), acting as the scheme’s cornerstone investor.
Providence Wealth’s managing director, Grant Patterson said the firm was drawn to the agricultural sector for diversification but had not been able to find what it was looking for.
“We are attracted to agriculture because it has low correlation to other assets and it has a number of economic tailwinds behind it. Australian primary producers are catering to growing demand from Asia and they are making strong productivity gains through the use of technology,” he said.
Patterson also said that Providence Wealth’s investors, who were high net worth individuals, wealthy families and not-for-profits, were “long-term investors with patient capital” meaning that they were “not put off by the prospect of an illiquid asset with a 10-year life” as agricultural land often was.
Patterson said that in Growth Farms, Providence Wealth had found the expertise and on-the-ground approach it was seeking.
The AALF would bring the farm leasing model already well-established in the US to the local market, buying agricultural land to lease to primary producers. This would give farmers an opportunity to expand their businesses without having to find the capital for more land.
Investors would receive an income based on the rental yield and would be exposed to the change in the capital value of the property, not the value of the business using the property.
Growth Farms forecast that the AALF would produce an annual gross yield of 4.5 per cent. Since 2008, Growth Farms had produced a pre-tax internal rate of return of 10.4 per cent a year.
Recommended for you
Following the closure of four investment teams last month by First Sentier Investors, Colonial First State has proposed multiple replacement managers for the CFSIL funds.
The Financial Services Council is proposing making the sophisticated investor test less subjective as currently wholesale fund managers are hesitant to apply it.
Macquarie Asset Management has expanded its active ETF range with the addition of two systematic active ETFs.
Innovations in the ETF space are changing the dynamic between public and private markets, according to VanEck.
