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A View of Corporate Agriculture – Performance and Prospects Australian Farm Institute Conference Canberra June 2014 David Sackett – Growth Farms David.

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Presentation on theme: "A View of Corporate Agriculture – Performance and Prospects Australian Farm Institute Conference Canberra June 2014 David Sackett – Growth Farms David."— Presentation transcript:

1 A View of Corporate Agriculture – Performance and Prospects Australian Farm Institute Conference Canberra June 2014 David Sackett – Growth Farms David Scammell – Pitt Capital Partners James Moreton – Pitt Capital Partners

2 What is “corporate” agriculture? Agriculture where the capital is provided by someone other than the operator.

3 A range of models……. Listed v unlisted Retail v wholesale Direct v fund Operate v lease Wholly owned v J-V

4 A range of motivations……. Financial o returns o inflation hedge o low correlation with equities Food security Low risk (capital preservation) Marketing Romance/ego/emotion

5 Advantages of corporate agriculture…… Access to capital Access to expertise (specialisation)

6 What is the track record? Entity Operating Return % p.a. Total Investor Return % p.a. (*) 1 5.4% % % % % 65.8% % 8 0.5% 9 ~6.0% * From commencement or 1st of January 2000.

7 Good performance of any investment requires: To buy well To manage well

8 The successful family farm (culture) Long term view Flexible, adaptable and responsive Flat management and accountable Lean and mean

9 Why have results been so variable? 0veremphasis on size to bring cost reduction & efficiencies o Scale benefits are mythical at farm level o Often compromises portfolio diversity (sector & regional) o Makes it harder to buy well

10 Variable results (cont)…… Poor alignment between managers and investors Fee structures not appropriate o Returns typically 4-6% EBIT, 6-8% capital appreciation Conflicts such as rolling assets in.

11 Time frames are too short o Short time frame to deploy large amounts o Year to year variability o Lumpy capital appreciation Variable results (cont)……..

12 Variable results (cont)……. A tendency to take on new and often unproven opportunities: o New industries o Tax driven (forestry, vineyards, sandalwood etc)

13 Key issues for the future….. Thematic of food is widely accepted o Must work at current prices Capital is mobile so we need to compete o Sovereign risk (Aust, NZ, Nth America) o Productivity (at farm level and to port) Sources of capital o High net worth individuals o Family offices o Institutions ($1,800 B in super funds) o Retail v wholesale? A range of models o Capital is mobile and glob

14 Key issues for the future….. A range of models o Large scale investors preferring direct v funds o Operate v lease v hybrid Lift the knowledge in both agriculture and the investment communities. Better performance and transparency o Index?

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