Warakirri Asset Management Pty Ltd ("Warakirri") offers specialist investment vehicles to meet the needs of charities, superannuation and individual investors across Australian equities, Australian agriculture, Currency Management and US real estate. In addition, Warakirri is a leading provider of after-tax benchmarking, reporting and performance analytics.
"I have the privilege of working with great people:" Q&A with Warakirri Asset Management's Adrian Goonan November 2018
Specialist agriculture asset manager Warakirri has just launched an agricultural fund which will enable family offices, high net worth individuals and not-for-profit organisations to access its expertise in this space. Industry Moves speaks to Adrian Goonan, head of agricultural strategy at Warakirri Asset Management, about how the agricultural industry is changing and why more young people studying agricultural-related fields is a good thing for the economy.
- You've been managing agricultural assets for decades, why was this fund established now?
Warakirri has been managing discrete agricultural investments for large pension funds for over 22 years. Our newest fund, the Warakirri Diversified Agriculture Fund, has been established on the back of direct enquiry from a different segment of the investment community, the family office, high net worth and not-for-profit space. Historically, this group of investors has had limited access to direct agricultural investments of this nature.
- How has Australian agriculture changed during the decades you've been investing in it?
Australian agriculture has changed considerably over the past two decades. Most notably through increased farm and investment scale, accompanied by increased demand for Australian agricultural products domestically and globally. Complementing this we have seen significant improvement in the sophistication and quality of agricultural operations. We continue to see agriculture shifting from small family-owned enterprises to larger corporate enterprises. When we started investing in cropping farms in the mid-90’s our target farm scale was 4,000 hectares – today we are targeting 20,000 hectares and beyond in some regions.
Collectively these factors make agriculture a far more attractive investment opportunity than it has been in the past.
- How has it changed or developed as an investment/asset class?
There is a growing appreciation of the positive role agricultural investments can have within a diversified portfolio of investments. Our experience is that professionally managed agricultural investments deliver competitive risk-adjusted returns, a low level of volatility and importantly are uncorrelated to the majority of other asset classes.
The other change influencing agriculture as an asset class is the reduction in real return expectations across other asset classes. So an investment offering an uncorrelated, defensive style return of 7% to 12% becomes very attractive.
- You mention the fund will focus on nuts, fruit, vineyards, intensive livestock, agriculture infrastructure and water. Can you explain how they are higher value sectors?
The fund will target a wide range of assets, with deliberate sector and regional diversification through a buy and lease-back strategy.
In general, the target sectors are more intensive and produce higher value products in comparison to alternative agricultural sectors. As a result, the sectors typically generate higher margins and attract greater market income lease rates.
- What kind of tenants do you expect to lease the assets?
We are looking for long-term strategic partners as tenants of the fund’s assets. These tenants will vary in type, from large scale listed agricultural businesses, to private companies and expert operators.
- How has the sector withstood the drought?
A key feature of the fund is the diverse nature and location of the target investments. Whilst the drought has certainly created some challenges on the east coast of Australia, there are many other parts of the country where more favourable conditions have prevailed – take Western Australia and Tasmania as an example. The other consideration is that many of the target sectors have permanent crops with irrigation water.
- What is the next big thing in agriculture, for the industry and for investors?
Advances in technology, the aggregation of data and the use of this information is likely to have the biggest influence on future productivity gains and, in turn, profit and returns. We are excited about advances in robotics, automation, genetics, sensors and the availability of precision agriculture data layers to help inform decisions.
The other exciting prospect for Australian agriculture is that the interest and enrolments for agriculture-related tertiary studies is at an all-time high. This is resulting in increased numbers of highly skilled graduates entering the sector. The new skills and energy these graduates bring to agriculture has the potential to make a very positive impact.
- What do you love about your job?
I have the privilege of working with great people at Warakirri and as a team we get immense satisfaction in identifying and enhancing quality agricultural assets for our investors. Achieving this goal and delivering results on behalf of investors is extremely rewarding.
- What advice would you give your 21-year-old self?
Be nice to your university tutor and 14 contact hours is really not that many!