Natural capital investment company Kilter Rural has closed its Australian Farmlands Fund at $65 million.
Announcing the close, the Bendigo, Victoria, based company said a new independent valuation of properties in the agricultural impact fund showed an 18% uplift since the last valuation in June 2021.
The fund seeks to invest equally in agricultural properties and water entitlements in undervalued or mispriced farmland regions. The net IRR return target is 10-12%.
Kilter says its fund is the only agricultural fund certified with the Responsible Investment Association of Australasia.
When fully invested, the fund is expected to have investments in about a dozen agricultural properties and about 4,000 megalitres of water entitlements.
Chief executive Cullen Gunn said there were now major global shifts in the way capital was being deployed and Kilter was experiencing increasing interest from institutional investors, particularly those in the northern hemisphere.
“The growing support Kilter Rural is achieving from the investment community both here and internationally illustrates that firms such as Kilter Rural, that are part of the transition to a low carbon future, can gain significant investor support, be part of the solution and still make great returns,” Gunn said.
In total, Kilter currently manages 12,000 hectares of farmland across northern Victoria.
Kilter Rural was established in 2004 to deliver profit with impact; investing at scale in the regeneration of farmland, water and environmental assets. Properties in which the Australian Farmlands Fund invests are targeted for soil regeneration and the development of sustainable food production, scaled biodiverse reforestation and carbon sequestration.
Kilter Rural also manages two open-ended water investment funds, the Kilter Water Fund which has achieved annualised returns of more than 15% and the Balanced Water Fund which is an environmental impact investment fund managed in conjunction with The Nature Conservancy.
Kilter Rural has a total of more than $300 million in funds under management.
Prior to its 2020 merger with First State Super (NSW), which created Aware Super, VicSuper owned a portfolio of mixed farming assets and water entitlements known as the Lake Boga agribusiness portfolio which was managed by Kilter Rural.
These assets were put up for sale in September as Aware Super sought to capitalise on strong farmland prices to redeploy the capital into other private markets investments.
Aware Super retains investments in agriculture, timber and water assets but considered the Lake Boga portfolio to represent higher operational risk than it targets.