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NZ Super Fund finding it a 'real challenge' to find overseas agriculture assets to invest in as 'wall of money' chases the 'new black'

NZ Super Fund finding it a 'real challenge' to find overseas agriculture assets to invest in as 'wall of money' chases the 'new black'

By Gareth Vaughan

The New Zealand Superannuation Fund, which launched a rural land strategy last year and bought its first New Zealand farm in February, is finding it a "real challenge" to secure suitable agricultural investments overseas with its chief executive saying rural assets are the "new black" and being pursued globally by "a wall of money."

NZ Super Fund CEO Adrian Orr told interest.co.nz in a Double Shot interview staff had "racked up the air points" searching for an overseas manager, or managers, for its rural land strategy and farms or other rural asserts to buy into.

"Agriculture, farm land, rural, anything to do with rainfall, grass growth, seems to be the new black when it comes to institutional investors," Orr said.

"So there is this wall of money out there looking to get access to this asset class," he added.

"The access point though is incredibly difficult. It changes across all countries, by farm type, by ownership structure, highly regulated about whether foreigners can own, all of the same types of things that happen in this country."

"So we’ve had a real challenge in nailing down assets, primarily assets, that we are comfortable owning that we think we are going to be rewarded for the risks that are involved in making those investments."

3% of fund's NZ$19 billion earmarked for rural land strategy

The Super Fund's rural land strategy, outlined by Orr in this previous Double Shot interview last year, sets out that it can invest up to 3% of the fund in rural land. The Super Fund, established by the previous Labour-led government to help cover future retirement costs, stood at NZ$19.03 billion at June 30, meaning 3% is about NZ$570 million.

Crop farms in sights

After appointing South Island-based dairy farming management and consultancy company FarmRight as an investment manager, the Super Fund announced the purchase of its first farm, a dairy farm in West Otago, in February. It now has nine New Zealand dairy farms. In February Super Fund general manager for investments Matt Whineray, said the Super Fund was also looking to appoint managers to lead a push into investment in crop farms overseas.

But it's still yet to make its first offshore rural land investment. Orr said in terms of implementing its strategy overseas, the Super Fund was now "about 80% scoped, 0% invested."

"So we’ve got a good feel for who knows the game, we’ve got a good feel for what the assets are that are available, (but) we aren’t that confident yet to be putting money on the table," said Orr.

"We’ll only invest when we think it’s worth it. Our single biggest challenge always is to be in a position where we can be opportune. It (opportune) is one of those words that’s over used but it’s critically important to us."

He said the Super Fund was indifferent in terms of the rural asset class it buys into and in terms of what part of the world it invests in.

"What we want to have a clear understanding of is what are the risks we’re bringing on board, how are they are going to be rewarded, is it worthwhile taking those risks on board, and once we do does it improve the performance of the portfolio as a whole?"

"The types of assets that we would be looking for are ones which are significant in size, where we can make a difference if we are directly investing in these things, and really come in a rarefied atmosphere that not many other people can get access to this investment," Orr added. "That might be because people need liquidity and we don’t, or that it’s a difficult market to get into, or they’re less patient than we are."

25% annual return & lots of tyre kicking

Orr was speaking after the Super Fund released its performance figures for the year to June, which showed a 25.05% unaudited annual return after fees but before taxes, with the latter considered as a return to the Crown.

Meanwhile, following the series of devastating earthquakes in Christchurch over the past year, Orr said Super Fund staff had been visiting the Canterbury region and being "very pro active" looking in for investment opportunities there.

Asked if the Super Fund had found anything in Christchurch to invest in Orr said: "We’ve kicked a lot of tyres to date but I won’t comment on specific investments. But without doubt I can safely say the shingle is out. They know the 0800 number and we’re ready to chat whenever as opportunities arise."

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13 Comments

Other funds have been looking in to farm land for some time:

http://www.citywire.co.uk/money/why-betting-the-farm-paid-off-for-invest...

Germans buying spree in Southland near end:

http://www.stuff.co.nz/southland-times/news/5563141/German-firm-spends-u...

"So we’ve got a good feel for who knows the game, we’ve got a good feel for what the assets are that are available, (but) we aren’t that confident yet to be putting money on the table," said Orr.  Wise man Mr Orr. ;-)

Leemee get this straight : We're taxing the productive workers and businesses in NZ , a country dominated by its primary produce sector ...... to invest in farms , in other countries ?

.. meebee old Gummy is a simple soul , but this is like a nun flying with Jetstar ..... virgin' on the ridiculous !

Can we go back to square one :..  ..  Why do we have the Cullen fund ? ... plus Kiwisaver , plus the NZ super ( pension ) .... couldn't we scrap something , simplify things ...... and give the tax-payer better bang for their buck ?

... racking up the  frequent flier miles are we ,  Mr Orr ? ... tough job that ! .. Ridiculous .

12:09am - Roger and you are still alive.

et tu , Walter ! .... but it is only 8:22 p.m. here , where I am ...

Ive been looking at this article for a few days, im getting disillusioned. I want to ask a question, perhaps someone could help me.

How does a superanuation fund help us increase our wealth by purchasing existing farms. I see this as the same wealth going round and round, the land is being farmed now by kiwis and the profits enter the community, if the super fund buys a farm and saves the profits isn't the community worse off, are profits not then relocated to the larger population bases leaving rural communities poorer. If they wanted to create wealth then they would need to invest in new industry not existing low return farms, I mean who doesn't know that farms return less than bank deposits, a school kid could have told them that. I take it they are factoring in significant capital gains but they are not into farming for capital gains as they obviously intend to keep the farms long term.

If the superfund kept reinvesting eventually we would be living in some kind of socialist utopia but more than likely,dystopia. 'Farmright' employs managers have the superfund not got the ability to employ their own managers and stop farmright taking most of the profits in commission?

He said

>>>

 

He said the Super Fund was indifferent in terms of the rural asset class it buys into and in terms of what part of the world it invests in.

"What we want to have a clear understanding of is what are the risks we’re bringing on board, how are they are going to be rewarded, is it worthwhile taking those risks on board, and once we do does it improve the performance of the portfolio as a whole?"

>>>

 thats got to be a joke, tell me he's joking, they are going to lose all our money.

Andrew,

I just think everyone has lost the plot. The world is crazy and suddenly agriculture seems to be on the radar as the flash new investment - you summed it up nicely, they are going to lose all their money.

Corporate farming doesn't work.  The floating dairy farm the NZ is becoming where we are all meant to milk cows on less than the minimum wage for some faceless corporate is not a future I look forward to.

Its just scary really

 

Scary indeed.  I cannot believe that this 'wall of money' globally is chasing agriculture as the "new black" when it's hard to find a farmer in any country of the world who would liken the  profits on their labour as the path to "striking riches". 

This 'wall of money' must be figuring on a correlation between longterm commodity price rises and profit at the farm gate - and they see anything food producing as the next "dotcom".    

Agree Simfarmer that corporate farming doesn't work in the long term. 

However your minimum wage comment is off the mark. 

  • Farm workers earned an average salary of $45,410 (up 4.9 percent in the year to October 2010). The average total package value (TPV) for farm workers (with salary and other benefits) was $49,374 (up 2.2 percent in the year to October 2010)
  • This compares with the average annual personal income, as recorded by the Statistics NZ Household Economic Survey (Income), being $36,847.
  • Casual skilled employees earned, on average, $20.29 per hour (up 2.5 percent) while unskilled casual staff earned $16.84 per hour (down 0.7 percent).

http://www.fedfarm.org.nz/n2972.html

Im not trying to be a dairy basher the industry really does has its good points and im sure your figures are correct.

But all that shows is what a low wage economy NZ has.  $45 k (average not medium ie skewed a bit by the managers) to work a 12 on 2 off roster with time off in June whether you like skiing or not.  Getting up at 4am and finishing at 6.  Id like to know the actual hourly rate that some dairy workers get paid.  You have got to want to do it - im not sure we should be pushing it as the only way forward.

I do love dairying but prefer the model of 400 cows with a couple running it with a full time well paid staff member and a casual.  The cows do better, the staff do better and more money flows back into the local community.  Just not a fan of factory dairy farming and that is what is happening.

Perhaps if farms werent riduculously overpriced they would be a bit more profitable and could pay workers a bit more and have better conditions - instead of scraping by and being farmed by the banks

Perhaps you've been a bit too long in Oz, Simfarmer? :-) The industry has moved on - the average dairy farm workers weekly hours are 54 spread over 7 days.  It is quite common for staff not to work between lunch and the afternoon milking-spring time sees some flexibility in this.  It is also not uncommon among good employers for staff to get at least one sleep in/late start a week and to have a 2.5day weekend off. All the employers I know only ask for employees to take one week off in the winter - and that's only started since 4weeks annual leave came in. But if they have employed a ski bunny then they will give them 2weeks.

The majority, numerically, of Fonterra shareholders produce 200,000kgs or less.  They are not large farms. As a 430cow farm owner I get a bit sick of being labelled according to peoples perception of the corporate model of dairy farming. The reality is that the majority of dairy farms are family sized farms.

Dept of Labour are more vigilant now in checking up that farm workers don't get less than the minimum wage. I personally don't know of any farmer that pays farm workers, with 2years or more experience, less than $40k per annum with house, milk, and (for some) meat additional to that.

You do have to love it.  That is something many people on this site don't seem to get - not everyone can, or wants to be, a farmer. Sound business skills are a must if you want to make it all the way to farm ownership. But you have to really, really want it. :-)

I'm more inclined to think of you as someone who 'accentuates the negative' rather than a basher - and you have plenty of company on this site on that score. ;-) Did I see an earlier post from you saying you may consider coming back over this way?

 

Perhaps I have been in Oz for to long :)  430 cow farm is about right i reckon.  Its big enough to utilise assets effectively and small enough to still know the cows and do a good job.  Its the 1000 plus jobs that I just don't think work that well.  There is the odd one thats ok but they are the exception.  When I first come to Auz I was the agronomist on a 2500 cow 3x milking farm year round calving. Except apart from doing the rotations I didnt get much time to look at grass - the staffing problems here are horrendous and the level of incompetence is unmimaginable.  Some of the things that went on would tend to make you accentuate the negative rather than look at the positive in the dairying scene.

In terms of coming home Im not sure. Have actually been thinking about it a bit lately.  I think I still need a couple more years to make a few more dollars to be comfortable back in NZ.  The exchange rate makes things look ok but then you look at the cost of living in NZ and its a bit scary.  Go from petrol at 1.4 a litre to whatever it is in NZ.  We picked up a house in western vic recently for 125k that had been completely renovated now under bernards income multiples we go well under 1.  Just don't think that would happen at home although we didn't sell our houses in NZ so don't have to worry to much I spose. 

The potential for making money here in Auz in the farming sector is massive because australians are generally incompetent and land is very cheap.  If you ever want some examples for diversification let me know

Arrgh-2500 cows x 3x milking :-(

Thanks for the offer.  Good luck for whereever you decide your future lies. :-)

 

Haha that's what I thought as well. Its a nightmare hence why not doing it anymore.  The sheep job is good over here.  Tis interesting times with other people getting all sorts of ideas about how they are going to make a mint out of Ag - but the skill sets just arn't out there.