August 25, 2023

When returns grow on trees


Our view as the largest non-bank lender in the Australian and New Zealand agricultural sector

Source: Australian Government, Treasury, Quarterly Report on Foreign Investment 2023

Our agricultural credit investment strategy has been evolving to target opportunities that we expect to outperform with lower commodity prices and a drier seasonal outlook, specifically:

Over the past 12 months, we have intentionally reduced our exposure in the Merricks Capital Partners Fund from 31% agricultural credit to 17% to create capacity for us to redeploy into this sector as weather conditions normalise and commodity prices trade closer to 5-year averages.

Our experience in both agricultural debt and equity gives us a unique view of the current opportunity in private credit within this sector. While equity ownership can outperform debt in times of high production and asset value appreciation, seasonal downturns and commodity cycles are inevitable and private credit returning 10-11% across a diversified portfolio of senior secured asset backed loans remains our strongly preferred path to participating in this sector. Across our target sectors, we are assessing a pipeline of +$250m opportunities with a forecast weighted IRR of 11.3% (net of fees and costs) and a forecast weighted average LVR of 58%.

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