April 15, 2015

By Sarah Day Levesque

Southern Pastures Management Limited, the largest New Zealand based institutional farmland manager, closed its New Zealand dairy fund, Southern Pastures LP, in February with $315 million in net assets.

The pure play dairy farmland and farming fund will focus on pasture-fed, free-range and animal-welfare based dairy farming in New Zealand – a sector that is consistently gaining momentum.

Despite recent declines in milk prices, increasing demand for animal protein in the emerging world’s middle class will continue to drive global demand for milk. Global dairy consumption is growing at more than 2% per year and is expected to double by 2050. However, long-term growth in milk production, estimated at 1.8% per year, is not expected to meet this growing demand, as production growth is naturally constrained by land, water, feed, and livestock availability.This expectation of an ever-increasing shortfall supports long-term price growth and presents strong fundamentals for investment in dairy farmland.

Prem Maan, Managing Director and CEO of the General Partner commented, “In a difficult fund-raising market, our success was due to a number of unique propositions such as a pure institutional and dairy focus, sustainability, high ESG standards, alignment of interests, long term inter-generational investment philosophy, and a management team that is completely New Zealand based.”

The fund’s ability to focus on pasture-based, free-range farming systems, which due in part to New Zealand’s plentiful grass and water is also low-cost, will allow investors to better navigate short-term price volatility and remain competitive through the cycle.

Commenting further Mr. Maan said,“Institutional investors found the GP’s philosophy and proven expertise of generating alpha through best-in-class hands-on management to increase sustainable production particularly attractive.”

Southern Pastures is a signatory of UN PRI and Farmland Principles and a founding member of the Upper Waikato Sustainable Milk Project.  The limited partners in Southern Pastures LP are all institutional investors.

The next Southern Pastures dairy fund will be launched in 2015.

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