Local investors overlook agriculture to their own detriment
Local institutional investors aren’t getting around emerging opportunities in Australian agribusiness, despite the country’s environmental practices, food safety, and close proximity to booming Asian population growth making it an appealing investment.
The gross value of Australian production last financial year was $50 billion, of which $50 billion were exports, while median prices for farmland had grown on average 6.6 per cent annually for the last two decades.
Despite this, the larger Canadian, UK and US investment funds were bigger investors in Australian agribusiness than local institutions. The superannuation industry, for example, was underweight in local agriculture, with Industry Super Australia citing funds’ total allocations at 0.3 per cent.
National director of Cushman and Wakefield Agribusiness, Richard Brookes, speaking at the Property Funds Association Conference in Hobart this week, said that while there were some good reasons for the under-allocation, the combination of yield via income from farming activities and capital growth meant that it was still a missed opportunity for investors.
“Challenges include a lack of nimbleness and a lack of information. Investors often go big in one sector, and risk being heavily exposed to one industry, whereas most family farmers understand the need to diversify,” he said.
Some institutional investors had some success partnering with large family operators, hoping to overcome this issue by leaving family management, who already had expertise in the investment, in place.
Brookes warned however, that choosing the right partners was crucial if going down that path.
“Institutional investors who are successful in agribusiness are good at going and finding the best producers once they have decided the industry they wish to invest in, whether it’s cattle or cropping. They have strong due diligence around who they partner with.”
AUTHOR
Hannah Wootton
Recommended for you
BlackRock has revealed that its iShares bitcoin ETF suite has now become the firm’s most profitable product line following the launch of its Australian bitcoin ETF last month.
Betashares has expanded its fixed income range with the launch of its Australian credit income ETF, offering income-focused investors an alternative to direct hybrids.
Fidelity International has rebranded its Global Demographics fund following an internal review to align the fund with a low-cost, research investment approach as well as reduced its management fee.
Royal London Asset Management has launched four global funds in Australia with Equity Trustees as its responsible entity as the fund manager builds “solid foundations” here.
