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Sovereign Wealth Funds

NZ Super makes first offshore farm investment as it targets 3% allocation to asset class

New Zealand Superannuation Fund on Wednesday announced its first offshore farm investment, with its purchase of a stake in Australian cattle seed stock producer Palgrove.

Terms of the deal — which lifted the NZ$35 billion ($25.2 billion) Auckland-based sovereign wealth fund's combined farmland allocations to NZ$340 million, or just less than 1% — were not disclosed.

New Zealand Super's most recent annual report for the fiscal year ended June 30, 2016, showed farmland allocations of NZ$204 million but Neil Woods, portfolio manager of NZ Super's timberland and farm investments, said in a telephone interview that the fund has made other farm-related investments in the interim.

Mr. Woods said NZ Super is looking to allocate up to 3% of its portfolio to farm and rural land-related investments over the long term so the fund still has "room to run." Returns for the asset class have ranged from mid-to-high single digits, he said.

NZ Super has invested in 22 farms in New Zealand over the past seven years. The partnership with Palgrove adds 11 farms in Australia to the mix.

Prue Bondfield, office and marketing manager of family-owned Palgrove, said in a separate interview the partnership with NZ Super will allow Palgrove to make the investments needed to fuel its next stage of growth.

Over the past 35 years, Palgrove's business has grown from 50 to 2,500 breeding cows, and the NZ Super investment should pave the way for that to increase by another 1,000 in the short term, said Ms. Bondfield.

Meanwhile, the partnership with NZ Super should likewise help Palgrove's small but growing business exporting "genetic material" of strains it has developed to markets such as China to expand as well, she said.