Barron's | 16 October 2010
By Tom Sullivan
The big asset manager is bullish on farmland, citing 10% returns.
Green Acres is the place to be. The folks at the Teachers Insurance and Annuity Association of America must be singing that tune from the 1960s TV sitcom after buying a controlling interest in Westchester Group, a nearly 25-year-old firm that acquires and manages farmland for institutional investors.
No terms were disclosed, but TIAA-CREF now has $2 billion allocated to equity in farmland in the U.S., Australia and elsewhere, making it a leader in diversified agricultural investing. "It's an evolving and emerging asset class," says Jose Minaya, managing director for natural resources. While there's not a whole lot of liquidity and transparency or institutional penetration right now, Minaya says TIAA-CREF is taking a long-term view of more than 20 to 30 years.
"From a historic perspective, it has delivered a fairly stable 8% to 12% return" annually, he says.
Soybean, corn and wheat prices can be volatile, but farmland is a finite resource and less vulnerable to weather conditions and other factors. It has low correlation to other markets but high correlation to inflation, so it's a good hedge. People are always going to eat, and population growth in emerging markets will mean increasing demand. Minaya notes that buying farmland is also "an efficient way to get exposure to water."Can an exchange-traded fund tied to farmland be far behind? Just don't buy anything from that Hooterville swindler of Green Acres fame, Mr. Haney.