Two major Canadian pension funds are moving into farmland. The Caisse de dépôt et placement du Québec and the British Columbia Investment Management Corporation have both made commitments to the TIAA-CREF Global Agriculture LLC, which has raised $2 billion to invest in farmland in the United States, Australia and Brazil.
Also investing in the fund is Sweden’s Second Swedish National Pension Fund (known as AP2).
TIAA-CREF manages approximately $2.5 billion in farmland—more than 400 properties—in grain-producing regions such as the U.S., Australia, South America and Eastern Europe. In addition, TIAA-CREF partners with local farmers and operators to manage and farm the properties, typically by leasing the land to farmers.
“We believe farmland offers investors excellent portfolio diversification given its low correlation to traditional asset classes like stocks and bonds,” said Jose Minaya, managing director and head of global natural resources and infrastructure investments at TIAA-CREF. “Farmland also acts as hedge against inflation within a portfolio.”
Institutional investors own just 1% of farmland due to historically high barriers to entry such as low liquidity, limited reporting and research and a large number of off-market transactions.
TIAA-CREF is a founding member of the Principles for Responsible Investment in Farmland, a group of international institutional investors that launched farmland principles in September 2011. These principles aim to improve sustainability, transparency and accountability of investments in farmland.