15 minutes with .... the founders of Perita Capital Management
By Michelle Pelletier Marshall, GAI Media
Boston-based Peritia Capital Management may be less than a year old, but its three co-founders are industry veterans who have 45-years-plus of collective experience in the private natural resources asset class. Danielle Jankowich, Avtar Vasu, and Qinhai Xia joined forces in July 2019 – after working together at Liberty Mutual investments – to build the business around the key principle of achieving competitive returns by investing in sustainable agriculture projects targeting a global portfolio focused on crops with fundamental demand/supply mismatch. Peritia is one of the only 100-percent independent, minority and women-owned managers in the asset class. The enterprise invests in hard assets or agribusiness companies via debt, equity, or joint-venture structures.
Each partner brings definitive skills to the team that are crucial for its success. Jankowich is an attorney with experience in deal structuring, asset management, and strategy implementation for global natural resource assets. During her 13 years with GMO’s natural resources division as head of investment operations, she led or participated in over 100 acquisitions, totaling $2 billion and spanning one million hectares across eight countries.
Avtar Vasu brings with him asset allocation and portfolio management experience in public equity, private equity, real estate, natural resources, and power/renewables gained while he was head of global private investments for Liberty Mutual Insurance, interim
CIO of UAW Retiree Medical Benefits Trust, and head of Special Situations for Harvard University’s endowment. He also has been chief investment officer at Wood Creek Capital Management, LLC, of Connecticut, a company he co-founded 15 years ago.
Qinhai Xia is a highly experienced, direct investment professional with deep knowledge of the value creation strategies in sustainable agriculture and timberland asset classes. He gained his knowledge through positions with Harvard Management Company, Four Winds Capital Management, and United Technologies/Sikorsky.
GAI News caught up with two of the founders – Jankowich and Vasu – as they prepared to participate for the first time as a sponsor in the Global AgInvesting event in New York.
1). Why a natural resources investment firm? And why now?
Avtar Vasu (AV): I’ve been in various roles where I have had the opportunity to invest not just in this asset class, but across all types of public and private asset classes. Having seen different portfolios either directly or through conversations with peers, I would say agriculture is an asset class that is overlooked by many institutional investors, not because they don’t want to invest in this asset class – they like the diversification benefits, especially at a moment like today, and the positive environmental benefits that this asset class offers – but they struggle with an understanding of the asset class and how best to get exposure. This is because sometimes the targeted structures or asset types typically found in the market are not necessarily in sync with what investors want.
Danielle Jankowich (DJ): There are definitely pockets of opportunity that are greater than what the common perception of agriculture is. There is more to agriculture than U.S. row crops. We have been successful in identifying and investing in those pockets, and that is our strategy going forward. I also think there is a strong ESG movement right now and the asset class has the two-fold benefit of offering a strong return and being a positive ESG asset.
2). How is it that you came together to start the company? How is each of you suited to support this endeavor?
DJ: We really wanted to utilize the benefit of our experiences, both from working together and combining our very different backgrounds, to create something unique. Being a minority and women-owned business is something that is very important to us as well. And unfortunately, the only way to do that is to start from the ground up, because that combination does not currently exist in this field.
AV: There is a lot to be said about being an independent firm, not attached to a large organization. Most of our competitors have either been a part of a larger platform or have been acquired by those larger platforms. To do right by what the asset class requires, having that independence is critical to stay away from conflicts. The timing is perfect now because investors are seeking emerging managers, an ESG focus, and active climate risk management.
DJ: Each of us individually has over 15 years of experience in the natural resources investing space, and even longer in other capacities in the investment business. We have a very well-defined strategy. We know how to find deals, how to analyze them, how to execute on opportunities, how to uplift operations and add value, and we have a history of working with local operators and successfully realizing strong returns. We all bring different perspectives and skillsets to the group. Avtar was a CIO and an executive overseeing private market assets; I come from a corporate law background with many years in institutional asset management; and Qinhai was an engineer with strong computer science skills and a system development background, as well as being tuned in to the fundamentals of demand/supply, and having very strong relationships in China.
3). What new expertise does Peritia bring to the sector?
AV: As a group we bring a holistic set of complementary skills and domain expertise. We have multiple skills: investment due diligence, legal and operations reviews, risk management consideration, and diversified portfolio construction. Where we do it differently is, we challenge assumptions and actively work on the opposite side of the argument. We also focus on who is going to buy the assets from us and when. We are very focused on exits and look to add expertise with boots on the ground where we take exposure, rather than taking exposure where we have boots on the ground.
DJ: Another advantage we have is that all three of us have worked at other institutions where we have been balance sheet investors. So, we have been in the role of the institutional clients that we are speaking to and understand exactly what they are looking for, return-wise and otherwise.
AV: Also, because we see things differently, we don’t have that “group think” problem and we can identify any blind spots because we are all looking at things from different perspectives. We are a global company with investing experience across five continents and a network of very strong operators around the world.
4). What types of projects is Peritia engaged in at this time?
AV: We start where the demand supply is, looking at what consumers want in terms of the crops we will grow. We review what type of assets institutions are making direct investments into, and go from there. We are trying to construct a mosaic – a portfolio that will withstand a range of potential long-term outcomes in the market. We are looking at where the world is going, what central bankers may do, what is the outlook for inflation, is there a recession ahead? Which portfolio would it make sense to own for the next eight, 10, 15 years? We look to construct something that is well diversified, and from which we can exit. We look to fulfill the supply gap. We think water is mispriced as an asset, as well as inflation, and inflation expectations are unusually low today. We are looking at nuts and fruits as opportunities where we either grow these products or get involved with those who do.
DJ: We are also looking at agricultural infrastructure – how can we more efficiently grow, store, and transport goods. The current COVID-19 has brought attention to the agriculture sector with attention on the global food supply and infrastructure. We are seeing increased consumer demand for healthy and locally grown food.
5). Where do you see the company in five years?
DJ: We expect that we will have raised and fully invested our first two funds by then. The development projects from the first funds should be completed and some of the assets should be in mature production. We will continue to look for opportunities underpinned by the macroeconomic market for later funds. The investments we make are platform-based so we do the research, develop the thesis, then we find the right location to undertake them. Our projects are repeatable and scalable for the long term.
As far as our team, we strive to be a diverse team. Often you do not see representation of women and minorities on the investment team, so it is our goal to have at least 50 percent of the team be women and/or minorities. We are looking for women to be in senior roles, as well as in junior positions where we can train and mentor to promote from within.
AV: Today, we would say that we are short on capital and long on ideas. We can easily deploy a billion or two billion with the ideas we have.
6). What is the goal for your fundraising efforts?
AV: We are looking at $30, $40, $50 million equity investments in a project, with the plan to have eight to 10 projects per portfolio, so our overall targeted fundraise is $500 million.
We just launched the fund a few months ago with our first close planned for June, although the current public health situation from COVID-19 may necessitate an extension. Our final close is end of next year.
7). Thank you for participating in Global AgInvesting (GAI) New York as a hospitality sponsor. What are your expectations with this commitment?
DJ: We’ve all been participants at the Global AgInvesting events in years past, but this is our first time as a sponsor. Whatever hat you are wearing, it’s always been a great opportunity to talk to your peers and see what others are doing as far as investment ideas, agtech innovations, and to hear from investors what they are looking for. We are looking forward to doing the same, and to gathering additional information. With the hat we’re wearing now, we want to really understand what investors are looking for, and we want to get out there and share our story.
AV: I will add that you guys (GAI) have done a tremendous job bringing people together and formalizing the asset class and raising the awareness. Kudos to you and the team for putting this [the GAI event] together three times a year in NY, London and Tokyo. We are looking to connect with people, and think that this is the best conference in the ag asset class – one you can’t afford to miss. We expect to contribute in many ways for mutual benefit.
ABOUT PERITIA CAPITAL MANAGEMENT
Peritia Capital Management invests in a variety of agricultural and forestry assets globally, including mature assets, bare land for greenfield development, and in private agribusiness companies. The company, based in Boston, Mass., seeks higher returns by focusing on its areas of expertise and where there is less competition – including specialty crops, land conversion strategies, and assets outside the U.S. Learn more at www.peritiacm.com or email [email protected]