Alternative Outlook | 23 April 2012
by Daniel Kiernan
Responding to strong demand, asset management firm Land Commodities has plans to launch its first retail farmland fund.
Investing in farmland is a notoriously difficult area for private investors to become involved in.
Although there are several agricultural funds available in the retail space, a pure farmland investment is difficult to come by. Firms attribute this lack of opportunity to the cost and illiquidity of the asset.
Now asset management company Land Commodities has given in to popular demand and has begun research into developing a proposition for the retail client.
Head of product development, Pax Zoega, says that working out the best way to structure the fund is an ‘exceptionally challenging’ task.
The initiative was first raised last summer but the company has only started to put the wheels into motion in the past two months, with expectations being that the fund will launch at the beginning of 2013.
It will be targeted at those wishing to invest between £20,000 and £200,000 on a long-term basis, that is to say a minimum of five years.
For this reason one of the most viable structures for the fund, says Zoega, would be a bond that has a lifespan of five to seven years. This would provide an annual income, projected at 5%, from the rental yield of the assets as well as the potential capital growth. It would also ensure that any investor would understand the illiquidity of the asset and the fact that it is not a short term investment.
“It is a simple, clear way of presenting a non redeemable fixed income bearing that still has the profile of direct exposure to the asset,” Zoega said.
The portfolio would be based wholly in Australia and New Zealand where, Zoega said, farmland is undervalued and can therefore provide an attractive income in a politically stable country where there is good protection for landlords.
The idea arose from the fact that the company receives around 10 to 20 enquiries from private investors each week, yet currently there is a gap in the market to serve this client.
by Daniel Kiernan
Responding to strong demand, asset management firm Land Commodities has plans to launch its first retail farmland fund.
Investing in farmland is a notoriously difficult area for private investors to become involved in.
Although there are several agricultural funds available in the retail space, a pure farmland investment is difficult to come by. Firms attribute this lack of opportunity to the cost and illiquidity of the asset.
Now asset management company Land Commodities has given in to popular demand and has begun research into developing a proposition for the retail client.
Head of product development, Pax Zoega, says that working out the best way to structure the fund is an ‘exceptionally challenging’ task.
The initiative was first raised last summer but the company has only started to put the wheels into motion in the past two months, with expectations being that the fund will launch at the beginning of 2013.
It will be targeted at those wishing to invest between £20,000 and £200,000 on a long-term basis, that is to say a minimum of five years.
For this reason one of the most viable structures for the fund, says Zoega, would be a bond that has a lifespan of five to seven years. This would provide an annual income, projected at 5%, from the rental yield of the assets as well as the potential capital growth. It would also ensure that any investor would understand the illiquidity of the asset and the fact that it is not a short term investment.
“It is a simple, clear way of presenting a non redeemable fixed income bearing that still has the profile of direct exposure to the asset,” Zoega said.
The portfolio would be based wholly in Australia and New Zealand where, Zoega said, farmland is undervalued and can therefore provide an attractive income in a politically stable country where there is good protection for landlords.
The idea arose from the fact that the company receives around 10 to 20 enquiries from private investors each week, yet currently there is a gap in the market to serve this client.
