September 20, 2016

Angola’s sovereign wealth fund, known by the acronym, FSDEA, is focusing on allocating capital to investments in state-owned farming operations.

The fund has secured seven large-scale farms totaling 72,000 hectares producing oilseeds, grains, and livestock, according to the fund’s first quarter investment update statement, with the farms carrying an expectation of returns between eight and ten percent over 10 years on an annualized basis, according to the fund’s chairman Filomeno dos Santos.

“Investors are invariably interested in Balancing risks and returns,” dos Santos told CPI Financial. “So direct investment in agriculture represents an opportunity for stable long-term returns and a way to diversify away from the risks related to the traditional assets held in the portfolio. FSDEA’s $250 million commitment to the agriculture sector is in line with this objective.”

Angola’s sovereign wealth fund is joining the list of other global funds turning to agricultural and farm investments as a means of increasing food security for their nations while also increasing return on investments.

Sovereigns Run on Ag

Over the past ten years, 14 state-owned sovereign wealth funds completed 51 deals in the farmland, agricultural business and timber sectors worth a minimum $11.1 billion, according to data gathered in 2015 by Sovereign Wealth Center. And over the same time period state-owned funds have also completed eight investments in the complimentary agri-chem sector with a value of $3 billion.

In 2014 Ding Xuedong, CEO of China’s state owned China Investment Corp. (CIC), announced that the sovereign wealth fund with $813.76 billion in assets under management was making food security a priority on its agenda, including plans to partner with institutional investors, governments, and multilateral organizations for the dual goal of increasing food supply while also increasing profits.

Meanwhile, last year, Temasek Holdings Pte, Singapore’s sovereign wealth fund, indicated that agriculture, along with life sciences and consumer goods, were the top three industries that the fund allocated capital to in the fiscal year ending March 31, reports Bloomberg. Over two years the share of agriculture and life sciences in the Temasek portfolio tripled to three percent, as the value of Temasek’s portfolio reached a new record.

“Like other sovereign wealth funds such as China Investment Corp., Temasek’s appetite for agriculture deals seems to stem partly from concerns about long-term access to stable food supplies,” David Evans, an analyst at the London-based Institutional Investor’s Sovereign Wealth Center, told Bloomberg.

Angola Runs with the Bulls

Angola is aiming to model FSDEA after other large, successful sovereign wealth funds such as Temasek which has been assuming management of government-owned real assets.

“We are getting a wider pool of assets that were once state-owned transferred to the sovereign wealth fund for commercial management and which are very interesting because they can generate a lot of revenue but also because they can help the country in its social and economical [sic] development,” dos Santos told Reuters.

With $4.56 billion currently under management, FSDEA is planning to acquire more state-owned assets by the end of 2016. In regards to the seven farms the fund acquired, management will allow market trends to determine the direction taken.

“We have to add new management to each of the farms, determine which crops will be produced, expand irrigation systems – basically making them as efficient as possible so they can produce competitively and allow us to have products that can compete within Angola and even outside,” dos Santos told Reuters.

“Soft commodity prices are recovering, and that reflects how the world is: a growing middle class … that creates additional demand,” said dos Santos. “We will look at those aspects when we decide which crops to choose.”

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Lynda Kiernan