Agribusiness fund goes wholesale

23 March 2007

| By Mike |

Macquarie has launched an agribusiness fund for wholesale investors that will see the manager buying farms throughout Australia.

The Macquarie Pastoral Fund will invest in sheep and cattle properties and is looking to raise up to $1 billion by the fund’s close date of March 31.

Macquarie Financial Services group divisional director said the fund had already identified “$1 billion of investment opportunities, with a minimum (property) size of $200 million to gain economies of scale”.

The reasons behind picking sheep and cattle for the initial investment opportunities was due to the strong return potential of these livestock sectors, as well as providing diversity in drought conditions.

Cattle tends to be raised in the northern part of Australia, which has been enjoying good rainfall, while sheep in the southern part of the country have been under more stress due to the drought.

“Our analysis showed this investment strategy created a good opportunity for the fund to achieve the returns we are aiming for,” he said.

“We have also identified that both livestock sectors have further return potential from sales.”

For cattle, it is looking at opportunities in Asia, Europe and the US, which are created when supplies from those areas are affected by diseases such as Foot and Mouth.

“With New Zealand struggling to meet lamb meat quotas into Europe, we see opportunities for exports to other markets,” Hornibrook said

Macquarie will be buying the farms and running the properties through its farming management company, which now has former chief executive officer in the same role.

“We think running the farm business and owning the asset is the way to go to achieve the returns,” he said.

“We can manage the land the way we want, which would be difficult if the previous owner is still running the farm.”

According to Macquarie, the average return from cattle between 1979 and 2005 was 11.24 per cent, while sheep over the same period returned 8.76 per cent.

The management expense ratio for the fund will be about 1.25 per cent of net tangible assets, Hornibrook said.