Specialist alternatives investment research firm Evergreen Ratings has assigned a “Highly Commended” rating to the AAM Diversified Agriculture Fund (ADAF), highlighting its ability to provide wholesale investors access to a part of the Australian agri-economy that has previously been the realm of primary producers and private market players.
ADAF is a closed-end Fund with diversified agricultural assets across Queensland, New South Wales and South Australia. ADAF provides access to four mainstream primary production supply chains – cattle, sheep, cropping and sustainable softwood processing. Late last year, more than $80m was raised to expand the livestock operations in Western Queensland and to further diversify operations through the purchase of two softwood timber businesses in Queensland and South Australia.
The Evergreen Ratings Report notes: “The overall assessment is that the ADAF has successfully mitigated a large proportion of risks within individual agricultural assets. By choosing to build scale beyond that of single-family owner operators, the concentration of production assets within farming sectors and geographies allows the extraction of scale and newer efficiency benefits to be better utilised.”
Evergreen Ratings Founder and CEO Angela Ashton says: “Although there may be several wholesale funds that target the agricultural sector, few could claim to be diverse, either in also being the owner of the operating entity (rather than just a lessor/lessee arrangement), or across both sectors and geographies, as ADAF.
“We see this as a significant point of difference to other investments in the agricultural sector, which may provide stable capital for operational leverage, as it makes the focus on long-term, sustainable farming practices.
“The second point of difference is in technology development and adoption across the various business lines. An example is the partially SA Government-funded Tesla battery, matched to numerous solar panels on the roofs of the chicken sheds, which significantly reduced reliance on the electricity grid and costs.
“Investors who can get past the unique or cyclical risks often present in agriculture, by taking a wider view that they may not apply to the entire portfolio at the same time, will see the direct benefits of this product’s wide diversification,” Ashton says.
Launched in 2020, ADAF’s performance objective is a quarterly distribution yield of 7-8% and a total return at better than 12%pa, over the entire life of this closed-end co-mingled unit trust. The investment timeframe is the remainder of the seven years initial lock-up period, plus three possible one-year extensions.
AAM Investment Group Managing Director and Founder, Garry Edwards, says: “AAM’s long-term objective is to create an institutional scale diversified agricultural portfolio across Australia.
“We expect ADAF returns to be driven by property and operational asset growth, with investors owning equal proportions of each across poultry, grains, sheep, cattle and timber processing sub-trusts.
“Additional upside will be sought from the strategic acquisition of assets that bring economies of scale to our existing businesses, one-off production or technology benefits and the repositioning of production outputs into higher margin products.
“In an era defined by global food demand trends that are transforming society as we know it, contributing to a positive and sustainable agriculture future for Australia is an exciting place to be,” says Edwards.