First State Super has invested 0.3 per cent of its $53 billion fund in a purchase and lease back of mature almond orchards in New South Wales, Victoria and South Australia.
The single transaction of $150 million was made with the listed company Select Harvest and gives First State Super access to what is Australia’s highest grossing horticultural export.
The 4000 hectare purchase is First State Super’s first direct investment in Australian agriculture and follows recent global institutional investor interest in the crop.
New York based pension fund TIAA-CREF boasts that it is one of the largest growers of almonds in the world, most of its plantations being in California. While the Ontario Teachers Pension Plan bought around 4000 hectares of almond orchards in Victoria for $115 million earlier this year, as part of a co-investment with a US investor.
Richard Brandweiner, chief investment officer, First State Super, described Select Harvest as a “highly successful” operation, that was poised for continued expansion and development, not least as global growth in the almond industry is 8 per cent per annum.
“The operation has strong underlying demand fundamentals; a globally cost competitive position; and scope for growth in regional Australia,” he said.
Michael Dwyer, chief executive of First State Super, said the purchase was the first but not the last direct investment in Australian agriculture that the fund expected to make.
“This will provide sustainable returns to help build our members retirement savings and will support regional employment opportunities and growth in Australian local industries,” he said.
A survey of 114 superannuation funds in 2015, commissioned by accounting firm BDO found that such funds invest on average just 0.3 per cent in the agriculture sector.
Farmland investments in the US are expected to deliver 11 per cent over the next 10 years compared to forecasts for equities of 5 per cent and bonds of 3 per cent and Australian farmland has the potential to do the same, believes BDO.
The advisory firm says agicultural investments can be a hedge against inflation, offer low correlation to equities and have low to moderate volatility.
First State Super was advised in this transaction by Lander & Rogers Lawyers and Blue Sky Water Partners.
Select Harvests was advised by PPB Advisory and Minter Ellison.