The cautious attitude among hedge funds towards agriculture
for much of 2017 appears alive in the private capital market too, with
investment vehicles focused on the sector seemingly unable to secure capital.
The private capital sector overall is enjoying a boom,
raising $356bn in the first half of 2017, across more than 600 funds, according
to Preqin – which said this data was likely understated.
This made the half the second largest ever for cash raising
by private capital funds, behind only the $384bn achieved in the first six months
of 2008, with 2017 potentially to set the record, given that 2008 witnessed a
hefty downturn with the onset of the world financial crisis.
"Given sustained high levels of capital being distributed to
investors from private capital funds in recent quarters, many institutions are
looking to commit or reinvest large amounts of capital to take advantage of
favourable returns," said Preqin the data group for alternative assets.
However, the trend is not being reflected in the natural
resources sector, in which total fundraising slowed to $5bn for the
April-to-June period, with 12 funds closing to new cash – the lowest totals on
both scores for any quarter since the July-to-September quarter of 2011.
Indeed, the performance represented a "sharp slowdown" from
that in the January-to-March period, when 21 funds closed, raising $27bn.
And of the 12 funds which did complete in the April-to-June
period, three-quarters were focused on energy.
'Unable to secure
Indeed, while Preqin was sanguine over the slowdown in natural
resources fund-raising overall – saying that, after a late-2016 surge in commitments
"investors may be pausing" before making further allocations to a market
segment which remains relatively small – it was less upbeat over the slow
activity in agriculture.
"What is of more concern to the growth of the asset class,"
of unlisted natural resources funds, "is the continued lack of funds closing to
pursue opportunities in industries other than energy.
"While there are many funds currently in market that are
looking to focus on agriculture, timber or mining, these vehicles do not seem
to be able to secure capital and hold a final close."
"If the asset class as a whole is to continue to grow,
fund-raising in these sectors must reach a more sustained level of activity."
In the first half of 2017, only three pure agriculture funds
closed, although a further three diversified funds, which also included farming
as mart of their mandate, closed too, according to Preqin.
That left 48 agriculture funds in the market, seeking an
aggregate $11.9bn, a picture not much different to three months before, when there
were 49 funds in the market targeting $12.2bn.
However, Mr Carr noted that of the 48 funds currently
outstanding, 23 have "already held an interim close and are therefore likely to
now also be making investments".
Among hedge funds, the April-to-June period was a negative
one for sentiment towards agricultural commodity derivatives, with speculators'
net short in futures and option in the top US-traded contracts topping 240,000
lots, the second largest on record.
The net short remains large, at 195,000 contracts as of Tuesday
last week – spurring talk of large losses among investors, given the rally since
in grain and oilseed futures.