Calgary, Canada, November 27, 2016 --(PR.com
)-- Homestead Capital USA LLC ("Homestead Capital"), a private equity firm investing in operating farmland in the United States, recently announced that it closed its second fund at $400 million in subscribed capital commitments, surpassing its original fundraising target of $350 million and more than doubling the size of its first fund which launched in mid 2015. The capital has come from sophisticated groups which include pension funds, endowments, foundations, insurance companies and fund-of-funds.
Agcapita believes that this continued strong interest in farmland investment is well founded based both on the positive long-term macroeconomic drivers for the asset class as well as the useful financial characteristics that farmland adds to an investment portfolio.
Over the long-term Agcapita believes that a shrinking arable land base combined with growth in demand for agricultural commodities, driven by demand for "food, feed and fuel," will support strong farmland values. In addition, historically (i) Canadian farmland has exhibited similar inflation hedging qualities to gold, meaning it performs better in times of higher inflation, but with an ongoing cash yield that gold lacks, (ii) Canadian farmland has shown very low correlation to other asset classes, meaning its investment performance is largely independent of other investments, and (iii) Canadian farmland returns have shown low volatility with high absolute returns equating to favourable sharpe ratios, approximately 3.03 for western Canadian farmland versus -0.23 for the TSX 60, over the last 5 years (a higher sharpe ratio is an indicator of better risk-adjusted returns).
In order to realize these very useful financial characteristics, Agcapita does not engage in operating farms as does Homestead Capital. Farm operation exposes an investor to many additional risks, including crop price volatility, weather risk, input pricing risk, etc., for which Agcapita believes an investor is not appropriately compensated for by way of adequate additional return from the farm operations. Instead Agcapita seeks to mitigate any exposure to the operational risks of farming, and therefore minimise any degradation in its realized risk-adjusted returns, through implementing its strategy of solely acquiring farmland and renting its land holdings to farmers through upfront cash rental arrangements.
Agcapita is one of Canada's most experienced farmland fund managers, launching its first fund in Q1 2008. Agcapita’s farmland funds continue to show great appeal to conservative investors concerned with inflation and the volatility of their existing public equity investments. Agcapita’s funds directly hold diversified portfolios of farmland in western Canada. If you are interested in finding out more about Agcapita Farmland Funds, please feel free to email us at email@example.com or register on our website www.agcapita.com.
This news release may contain certain information that is forward looking and, by its nature, such forward-looking information is subject to important risks and uncertainties. The words "anticipate," "expect," "may," "should" "estimate," "project," "outlook," "forecast" or other similar words are used to identify such forward looking information. Those forward-looking statements herein made by Agcapita, if any, reflect Agcapita's beliefs and assumptions based on information available at the time the statements were made (including, without limitation, that (i) the demand for agricultural commodities will continue to grow at a pace that is unlikely to be matched by growth in agricultural productivity, and (ii) investment demand for tangible assets such as agricultural commodities and farmland will continue to increase for the foreseeable future). Actual results or events may differ from those anticipated or predicted in these forward-looking statements, and the differences may be material. Factors which could cause actual results or events to differ materially from current expectations include, among other things: risks associated with the ownership and operation of farmland, including fluctuations in interest rates, rental rates and vacancy rates; general economic conditions; local real estate markets; supply and demand for farmland; competition for available farmland; weather; crop diseases; the price of grain and other agricultural commodities; changes in legislation and the regulatory environment; and international trade and global political conditions. Readers are cautioned not to place undue reliance on any forward-looking information contained in this news release (if any), which is given as of the date it is expressed herein. Agcapita's undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise.