Duxton agri fund hoping to harvest $100m

Duxton Capital is seeking $100m for a fund which owns stakes in the specialist investor’s suite of local agricultural assets, and which will pick up a portfolio of global stocks.

Agriculture – including vineyards – is one of the most undervalued investment opportunities, and an effective inflation hedge.

Duxton Capital is seeking $100m for a fund which owns stakes in the specialist investor’s suite of local agricultural assets, and which will pick up a portfolio of global stocks in the sector.

The investment firm already has an institutional investor on board for $15m of the $100m raise, with a further $2m in commitments pledged to the Duxton Diversified Agriculture Fund.

The unlisted fund, which is open to wholesale and sophisticated investors, owns minority stakes in Duxton assets including Duxton Vineyards, Duxton Dried Fruits, Duxton Bees and Duxton Orchards.

Water entitlements will make up 20 per cent of the fund’s allocation post-raise, with the dried fruit and vineyard entities also accounting for 20 per cent each.

The fund is also targeting a 20 per cent exposure to global agriculture equities, and is aiming for overall returns of 11-14 per cent.

Duxton chairman Ed Peter, in a letter to potential investors, said the fundamentals of agriculture are compelling.

“This year alone it is expected there will be an additional 80 million mouths to feed as the global population races towards 9.8 billion people in 2050,’’ Mr Peter wrote. “People are increasingly consuming higher-calorie diets with the emergence of middle classes in developing economies.

“While the demand for agricultural food commodities is increasing, the availability of productive arable land continues to consistently decline.’’

Mr Peter told investors that Australian farmland has outperformed both the S&P 500 and ASX 200 over the past 20 years “and offers investors returns that exhibit low correlated returns with traditional asset classes’’.

Chairman and co-founder of Duxton Capital Ed Peter. Picture: Tom Huntley

“It is clear for investors that the question shouldn’t be why agriculture, but instead where and how should I be investing in agriculture,’’ Mr Peter wrote.

Mr Peter told The Australian that agriculture was one of the most undervalued investment opportunities at the moment, and an effective inflation hedge.

“The fund provides diversification not just across commodities but also geographies, farm management styles and investment time horizons, supported by top-tier agriculture managers and a highly experienced investment team,’’ Mr Peter said.

“Importantly, DDAF also has a very strong focus on driving sustainability initiatives and decarbonisation, supported by a dedicated ESG team committed to achieving large-scale sustainable production systems.”

The fund is a major holder of Australian vineyards, owning 2463ha under vine, or about 6 per cent of total wine grape production, the fund said.

“Duxton Vineyards is a fully vertically integrated wine enterprise with control of product through the nursery, vineyard, winery and onto the shelf,’’ the investment memorandum reads.

The dried fruits business is the nation’s largest by hectares under vine with plantings across the Sunraysia region of Victoria and NSW, Duxton told investors.

“The business currently operates 540ha of dried grape vineyards, with an additional 200ha three stage greenfield development planned to commence in 2022 … By 2029 the company aims to produce 37 per cent of Australia’s dried fruit. The company has secured long-term offtake agreements with the two leading Australian packaging, storage and distribution businesses.’’

The walnuts and orchards business are also substantial, with 576ha of walnuts and 316ha of apples under management.

“Duxton Orchards is planning an additional 50ha planting at Nangwarry along with an expansion of the cool room facility at Monarto, planned to commence in 2022,” the letter reads.

The listed equites sub-portfolio will invest in assets trading at prices which “do not fully reflect their long-term potential’’.

“The fund also includes provision for an opportunistic exposure, limited to a maximum of 20 per cent of the equities sub-portfolio, which seeks to generate increased returns over a shorter investment horizon through exposure to mis-priced agriculture related equities, and macro-economic thematic events.’’

The fund has a minimum investment of $100,000. The management fee is 0.85 per cent of net asset value with a 10 per cent performance fee above an 8 per cent return against benchmark.

Duxton also manages the listed entities Duxton Water and Duxton Farms, and has also been investing in South Australian pubs through Duxton Pubs.