April 30, 2015
On Wednesday April 30, U.S. Secretary of Agriculture, tom Vilsack annopunced that the U.S Department of Agriculture (USDA) will support two private investment funds raising a combined $125 million for investment in ag-related businesses in rural America.
The $100 million Meritus Kirchner RBIC II and the $25 million Innova Ag Innovation Fund, called Rural Business Investment Companies, are part of the USDA’s initiative to attract private investments from some of the largest U.S. investment firms including BlackRock, Blackstone, and GE Capital. Both have lalso been granted approval from the department to raise money from the Farm Credit System and private investors. Similar to hedge funds, each will take an annual fee of 2% of the money raised, and an incentive fee equal to 20% or less of returns each year.
This announcement follows Tom Vilsack’s previous announcement last year of a $10 billion Rural Infrastructure Opportunity Fund, which is being financially backed by CoBank. As global interest rates remain close to zero, the USDA has been campaigning to dirve investments from large institutional investors and pension funds to agriculturally related businesses, and these funds are being created to act as vehicles for those investors eeking exposure to these types of opportunities. So far the Rural Infrastructrure Oportunity Fund has not announced any investments, but Mr. Vilsack hinted that the White House Rural Council is preparing to make 10 investments in rural infrastructure projects.
Mr. Vilsack noted in an interview with the New York Times that there is ‘tremendous demand’ for ag-related investments from entrepreneurs, venture capitalists, endowments, and pension funds. “The financial sector’s interest in agricultural-related investments has grown in recent years,” he states, adding, “There is a growing awareness of opportunity there and a lot of demand from the pension side.”
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