-Today
--wow, super funds will come
---wow, Deputy Prime Minister Barnaby Joyce has called on superannuation fund investment managers to meet with their boards this Monday to explain their lack of investment in Australia's rural and agriculture sector
QIC's NAPCo delivers $72m profit as super funds miss the farm boom
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Deputy Prime Minister Barnaby Joyce says super funds lack the expertise to invest in agriculture. AAP
Deputy Prime Minister Barnaby Joyce has called on superannuation fund investment managers to meet with their boards this Monday to explain their lack of investment in Australia's rural and agriculture sector, following another massive $72 million profit reported by the North Australian Pastoral Company, acquired last year with money from the UK-based Pension Protection Fund.
Mr Joyce said he has been infuriated to see Australia's retirement savings missing out on strong investments in the agricultural sector, where at least half a dozen offshore super funds from the US, Canada, Denmark, the Netherlands and Sweden have had the expertise to invest more than $2 billion in the last six years.
"The investment managers of super funds should hold a meeting this Monday and ask what their investment in agriculture is and they will find themselves saying 'Are you telling me that we have bonds with negative yields and yet we don't have any exposure to agriculture in Australia?" Mr Joyce said.
"There are farmers who are making very good money – the smart money has moved in with Gina Rinehart, Andrew Forrest, Kerry Stokes and overseas pension funds but the people walking down Pitt Street and Collins Street are missing out."
NAPCo, one of the top five largest landholders in Australia with 13 cattle stations across Queensland and the Northern Territory covering 5.8 million hectares, was bought out last year in a deal
foreshadowed by
The Australian Financial Review. The Queensland Investment Corporation (QIC) bought an 80 per cent stake in the company that ultimately controls NAPCo, with the remaining 20 per cent stake maintained by existing NAPCo shareholder, the private Foster family.
QIC's investment was backed in part by the UK's Pension Protection Fund – a crucial statutory fund intended to protect members if their own pension funds becomes insolvent.
The investment continued the growing trend of offshore funds buying in Australia, including TIAA's Westchester which has $1 billion worth of land now. Canada's Public Sector Pension Investment Board has purchased close to $90 million of cattle stations in the state in the past 18 months. Dutch pension fund APG is a major backer of one of Australia's largest cattle station owners, Macquarie Group's expanding Paraway Pastoral. Danish pension fund Pensionskassernes Administration (PKA) has backed the purchase of $60 million worth of Queensland cattle stations through local operator Sustainable Land Management Partners. Swedish pension funds have also invested heavily.
But Mr Joyce said he was infuriated that Australian super funds could not compete with such purchases, with only a few having invested and some even starting to sell out, such as those behind the Sustainable Agriculture Fund including Australian Super.
"It is infuriating!" Mr Joyce said, "They turn up with their elastic-sided boots and the right belt but that's as far as they get when it comes to agriculture. They give excuses such as it's not liquid enough and it's not negotiable enough but really I think it's just a lack of expertise at the asset investment level."
He was careful to commend QIC, which manages $79 billion in funds but is not a super fund itself.
NAPCo's chairman Phil Cummins said he was pleased with the first financial result of NAPCo but shied away from the debate about super funds' attempts to get a foothold in the sector.
"There is no simple answer as to why Australian super funds have not invested," Mr Cummins said. "We can't speak for them. For us, we like the thematic but we also like the business – it has two great parts. It has a large breeding herd which is a rejuvenating asset and it has a large number of properties. These things enable the business to be self sustaining."
Association of Superannuation Funds of Australia chief executive Martin Fahy defended super funds' decision to steer away from agriculture, saying there were risks including climate change, liquidity constraints, cyclical risks, and high transaction costs which made investment in such an area difficult.
"It can be a lumpy asset class to buy and sell and it does require specialist investment managers," Mr Fahy said. "The clips of investment are also relatively small."
He also said that Australian super funds could not match it with the larger offshore players because of super funds' portfolio allocation restrictions. For larger funds such as TIAA the same percentage investment allocation would translate to a much higher dollar value of investment.
"Australian super funds have significant exposure to the wider economy and to take a significant exposure to agricultural land would expose them to concentration risk," he said.
However BDO executive director of corporate finance Margaux Beauchamp, who recently attended the GlobalAG investment conference in New York, disagrees and says Australia is one of the key places to invest and that more should be done to take a position.
"Globally institutional investment in agricultural represents around 4.5 per cent of the agricultural investable universe. Australian institutions have a lot more investing to do to be in-line with the global trend," Ms Beauchamp said.
BDO's own reports have highlighted the poor investment returns as one of the barriers to institutional investment.
"However the Global AgInvest conference highlighted that no matter how you cut the data to examine different time periods agricultural investment outperformed all other asset classes," she said.
NAPCo's latest results did not show any valuation gains as the portfolio had not be revalued. However the latest data on Australian rural values shows there has been strong gains. The national median farmland price increasing 9.3 per cent in 2016, up from 5.3 per cent in the previous year.
The country's second biggest landholder, ASX-listed beef producer Australian Agricultural Company, reported a
7 per cent rise in the value of its vast rural property portfolio in full-year results released earlier this month.
The results showed the value of AACo's freehold land and pastoral leases increased $44 million to $567 million, rising to $668 million when including buildings and improvements.
It follows the company reporting a
15.8 per cent surge in property values in the previous financial year.
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