Land Commodities Asset Management AG was established in late 2008 by a small group of professionals from an investment and agricultural background. Early on in the financial crisis it was already quite clear that there would be opportunities opening up as investors sought alternatives to mainstream asset classes. We also understood that agricultural assets had many of the characteristics that investors would find attractive in the new environment (see Farmland investment basics).
What we hadn’t fully appreciated at the time was the extent to which the investment environment would change. Post-2008 it became clear that traditional risk management models were woefully unfit for purpose, having completely failed to predict the crisis or to protect investors’ capital as it unfolded. The old models are also failing in the current climate. In the new risk-on risk-off world assets that were negatively correlated pre-2008 are now moving in tandem. Markets that were once driven by fundamentals are now driven more by politicians and central bankers.
The “new normal” would have seemed highly abnormal to a pre-crisis investor. Few would have predicted that by 2012 China’s economy would be faltering, the Euro area would be facing a possible breakup, interest rates would remain near zero in many parts of the world, Ben Bernanke would be in the thick of QE3 and that the global economy would remain sluggish with most Western consumers feeling like they never stopped being in a recession.
As a company Land Commodities has gone from strength to strength whilst the investment environment has lurched from crisis to crisis. But there’s been more to our success than simply backing the right horse (i.e. agricultural real assets).
We realised early on that the real opportunity was not that increasing numbers of investors would be looking at agricultural assets for the first time, but rather how poorly those that did were being served. It seemed that the embryonic world of agricultural investment was dominated either by financial professionals pretending to know about farming or by farmers pretending to understand the financial markets. By bringing the two disciplines together under one roof, Land Commodities has been working hard ever since to provide a better alternative.
We chose the UK as our launch market and capitalised on some great buying opportunities that had arisen there as a result of the near collapse of the UK’s independent agricultural lending sector. We developed a groundbreaking purchase and leaseback transaction model, giving our investors all of the benefits of direct ownership and a stable income stream whilst allowing cash strapped farmers to continue farming.
As the opportunities dried up in the UK we switched our focus to Australia. This was driven by the fact that Australia is quite simply THE agricultural investment market of choice today for any serious investor. This website is laden with facts an analysis supporting this view (see Australia versus other agricultural markets and Investing in Australian agriculture), but in short, Australia offers investors developed world infrastructure, security and transparency at developing world scale and land prices. As a result, Australia offers arguably the most attractive risk adjusted returns of any major developed world producer.
Land Commodities Asset Management AG is headquartered in the Swiss canton of Zug. Formerly known for its agricultural economy, Zug is now better recognised as a relocation destination for hedge funds due to canton’s particularly favourable tax regime. This, combined with the fact that we are located 20 minutes from Zurich’s financial district, a region synonymous with the very best traditions in high-end wealth management, ensures that our clients benefit from the best of what Switzerland has to offer.
In combination with our office in Australia we are now able to support professional investors in two time zones whilst having boots on the ground in the rural and agribusiness communities in which we operate. Our Australian subsidiary, Land Commodities Australia Pty Ltd (established in early 2010), is a joint venture between Land Commodities Asset Management AG and Corporate Agriculture Australia Pty Ltd (CorpAg).
Combining the strengths of both companies has brought Land Commodities and its clients extraordinary benefits. CorpAg is a spinoff from FARMANCO Management Consultants, Australia’s largest agribusiness consultancy and agronomy practice. FARMANCO specialise in Western Australia, the country’s most reliable grain producing region and the Australian state with the most compelling investment fundamentals (see our downloadable report, Comparative Analysis – The West and the Rest and Investing in Australian Agriculture for the facts).
FARMANCO provide agronomic and management services to over 800 farms in the region, with a total farming asset base of approximately AUD$6 billion extending to over two million hectares of farmland with annual production of:
They also have ten offices covering the whole of the region staffed by some of Australia’s most respected agricultural professionals. By having ready access to this pool of expertise, Land Commodities is able to augment its in-house team in a cost effective manner, giving us the flexibility to scale our activities and fulfil large mandates at short notice.
With our local subsidiary we have rapidly developed into Western Australia’s leading advisory firm by transaction volume, having completed over AU$ 80 million of transactions across 28 commercial scale farms in the first three quarters of 2012 alone.
The future? Our mission is to become the global leader in the provision of direct farmland investment advisory and management services. Our method is simple: continue to deliver unrivalled analysis and advice in a transparent and cost effective manner.
Note: Although our primary focus is Australian rainfed arable and mixed arable-livestock farming, our team have extensive first-hand experience of managing a range of large scale agricultural enterprises, including irrigated arable, sheep and beef livestock, sugarcane, coffee, cocoa, rubber and citrus. Our team members have managed farms of these types in regions as far flung as the UK and Australia to parts of Southern Africa and East Asia. We would consider mandates in other regions (if necessary, augmenting our in-house team with additional local experts) for larger portfolios (as an indication, the non-Australia + UK investment allocation would need to exceed $20 million).