Harvard University’s $36 billion endowment fund system is in the process of reorganizing its $4 billion natural resources portfolio according to the Wall Street Journal. The decision comes after former TIAA Global Agriculture Fund Committee member Colin Butterfield assumed the role of head of natural resources in August of last year after Alvaro Aguirre-Simunovic resigned from the position in October 2015 after 12 years in the position.
Over the years, Harvard has built a diversified ag investment portfolio with directly owned assets that include vineyards in California, row crop operations in Brazil, and timber in Chile. However, it is the fund’s 8,500 acres of dairy farms and herd of 5,500 in New Zealand’s South Island that private equity firm, KKR is reported to be in negotiations to acquire in a deal worth more than $70 million. Sources also revealed that Harvard intends to sell 25,000 acres of farmland in New South Wales, Australia.
The decision to reorganize its natural resources holdings comes less than a year after the endowment was driven to write down its value by more than 10 percent – driven by a slowing of transactions in the ag and timber sectors the year before, and adverse weather and political unrest in South America, according to Private Equity International. This negative impact on short-term liquidity reflects the biggest loss since the fund entered into natural resources in 1997, according to the Journal.
Over the past 10 years, Harvard has spent $40 million in New Zealand to acquire dairy farms and farmland, adding millions more in capex for improvements. Despite this, sources tell the Journal that the New Zealand dairy deal will still prove to be profitable for Harvard, even with dairy prices at multi-year lows.
It wasn’t long ago, in November 2016 that Harvard was expanding its exposure to the New Zealand dairy sector – acquiring 143 hectares in Central Otago adjacent to the Big Sky Dairy Farm which Harvard Management acquired six years before for $28 million, according to Stuff.com.
It was this same month that Bloomberg reported that Harvard University was looking to sell down its natural resources portfolio in order to loosen cash for other investments.
“The team is focused on refining HMC’s natural resources strategy and streamlining assets that are concentrated across certain asset classes and geography,” said Spokeswoman Emily Guadagnoli in a statement at the time.
Only months later, in January of this year, N.P. Narvekar, CEO of Harvard Management, issued a letter in which he outlined the strategic shift for the endowment’s investment approach, under which the fund will move away from a silo investment model to a generalist investment model.
“Importantly, the generalist model will be supported by a partnership culture in which the collective team engages in focused debates about investment opportunities both within asset classes and across the investment universe,” said Narvekar.
Regarding the sale of its New Zealand dairy holdings, Harvard declined to comment to the Wall Street Journal’s enquiries, however, Boston-based ag and timber firm Follium Capital – which was founded last year by Andrew Wiltshire, the former Head of Alternative Asset for Harvard Management, and former Harvard Management colleagues Oliver Grantham and Alvaro Aguirre – has reportedly approached Harvard about buying certain assets, according to sources.
-Lynda Kiernan
Lynda Kiernan is Editor with GAI Media and daily contributor to GAI News. If you would like to submit a contribution for consideration, please contact Ms. Kiernan at lkiernan@globalaginvesting.com
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