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From Pensions & Investments, July 24:
Timber, agriculture cycles forcing firms to examine new avenues
Managers in a number of real asset sectors — with the possible exception of infrastructure — are having a tough time raising capital. And that is only the leading edge of the storm buffeting them.
Some timber funds are nearing the end of their lives with managers expected to bifurcate into the haves and have-nots when they go out to raise new funds;
Farmland is in a state of flux, with managers now making value-added investments;
Real estate managers have more money than they can spend, with a record amount of dry powder but fewer deals.
Fundraising is slowing. Many institutional investors' allocations to real assets have little room for expansion, said Peter Martenson, partner in the San Diego office of placement agent Eaton Partners LLC.
"(Limited partners) have full allocations and commitments are going a little bit slower because, I think, real assets has not had a reason to shine," Mr. Martenson said. "Commodity prices have stayed low. Oil and gas is a classic example. People thought the recovery would have happened sooner. It's the same thing with metals and mining, in general."
Investors might fill in around the edges, like adding a tactical strategy that feels compelling, he said.
Also hurting fundraising is that, at least in the U.S., few investors are expecting either inflation or deflation, which is one of the reasons many investors invest in real assets.
Having second thoughts
At the same time, some investors are reconsidering their real asset portfolios, rebalancing out of strategies that have not worked and boosting investment in sectors that have.
Harvard Management Co., which manages Harvard University's $37.6 billion endowment, is reviewing the investment strategy for its $2 billion natural resources portfolio, sources said. Currently, Harvard Management Co. is in discussions to sell dairy farms and cows in New Zealand to KKR & Co. LP, sources said. Any transaction would be pending regulatory approval, these people said.
Emily Guadagnoli, an HMC spokeswoman declined comment.
KKR spokeswoman Kristi Huller, said a possible sale by Harvard has not been announced.
Officials at the $323.6 billion California Public Employees' Retirement System, Sacramento, are in the process of re-examining the role of forestland in its portfolio and restructuring its domestic forestland portfolio.HT: Farmlandgrab
CalPERS officials are taking a look at its forestland portfolio as part of an asset-liability study that also will examine whether to combine real estate, infrastructure and forestland into a single roughly $35.7 billion real asset program or retain them as separate asset classes . An asset allocation decision could be made as early as December, according to a CalPERS timeline.
CalPERS officials are considering the sale of its Crown Pine Timber portfolio, sources said....MUCH MORE