Institutional Investor: Pension Funds Pick Equilibrium’s Permanent Crops Fund

Institutional Investor used the recent close of Equilibrium Capital’s $250 million ACM Permanent Crop Fund as an example of major pension funds warming to sustainable real assets.

“In a coup for a first-time fund, the $103.6 billion Washington State Investment Board and the $13.2 billion Maine Public Employees Retirement System each committed $50 million,” writes senior writer Imogen Rose-Smith. The fund was oversubscribed and hit its hard cap of $250 million, the magazine reported.

Rose-Smith cites studies from BlackRock and Greenwich Associates that found growing interest among institutional investors for real assets generally and agriculture in particular. Real assets include infrastructure, real estate, farmland, timber and commodities.

The ACM Permanent Crop Fun has some unique characteristics. It focuses on crops that don’t have to resown regularly — citrus, berries, table graps and nuts — in California, Oregon and Washington state. The fund not only owns the farmland but controls the growing, processing, packaging and marketing of the crops.

She notes that many larger institutions remain wary that mission-driven funds “will produce lower returns or, worse, sacrifice yield for impact.” The Equilibrium team argues that sustainability techniques that produce high-value products and enhance the soil and other qualities of the underlying asset should be a source of ‘alpha,’ or above-market returns.

Rob Hurlbut, one of ACM’s managers and head Equilibrium’s agriculture strategies, tells Institutional Investor, “We gain real benefits by coming in and actually farming the land such that we can improve its value over the life-cycle. Most institutional investors that buy up property instead collect lease payments from independent operators, he says.

Rose-Smith cites global agriculture and consumer trends — a growing population requiring a high-protein diet and demanding better-quality produce — that add to farmland’s potential as an investment,

ACM’s theme of sustainable agriculture, along with the so-called organic consumer and technology innovations in farmers can strike a chord with investors — even those who might not otherwise be interested in funds with a social or environmental impact.

She quotes Brooke Randall, another Equilibrium principal, who says that not all investors in ACM Permanent Crops were interested in the sustainability angle at first but it often became a compelling part of their reasoning for committing capital.

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