Investments, Strategy

Bad news veiling agriculture opportunities

Many SMSF investors are unaware of the benefits of diversifying into the agriculture sector due to misconceptions driven by negative farming stories.

According to specialist asset manager Growth Farms Australia, unravelling the myths was a key challenge for the firm when it came to trustee concerns.

“People are hearing the bad stories and so they haven’t really understood the opportunities in agriculture and there’s also that general perception around agriculture being about struggling farmers,” Growth Farms Australia managing director David Sackett told selfmanagedsuper.

“If you farm in particular areas of Australia, you’re going to have to expect some tough years [and this sort of coverage] has meant it’s not seen as investment grade.”

Sackett said due diligence is vital, particularly looking at the sectors of Australian agriculture the investment is exposed to.

“For example, one of the risks is periods of low rainfall, so we’re investing in medium to high rainfall areas, and it doesn’t eliminate the risk, but it does reduce it,” he said.

“We’re going to construct a portfolio that’s in different agricultural sectors – dairy, cropping, et cetera – so we’ll be in different areas as well, and both of these factors will help manage the volatility.”

He revealed the firm has received increased SMSF inquiries over the past weeks, particularly as access opens up, demonstrating growing interest in the asset class.

“We’ve also been inundated with calls from farmers who are looking to expand their business, so we know the vacancy rate will be virtually zero as we already have these arrangements in place with existing investors,” he said.

Last month, the manager launched its Australian Agricultural Lease Fund, which will acquire agricultural land and water rights and lease them to third-party primary producers.

The fund is open to wholesale investors with a minimum investment size of $100,000 and is expected to produce an annual gross yield of 4.5 per cent.

The offer will close on 30 September.

Growth Farms Australia was established in 1999 and currently invests in Australian agriculture on behalf of institutional funds, family offices and high net worth individuals through separately managed accounts and unlisted funds.

It has more than $440 million in funds under management.

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