Australia’s biggest investment bank, Macquarie Bank, hopes to raise at least $200 million from institutional investors as part of its plan to become a livestock farmer on a mega scale.
The bank has formed the Macquarie Livestock Company, which plans to buy large tracts of prime Australian agricultural land, through its Macquarie Pastoral Fund, and will eventually farm up to 200,000 sheep and cattle.
The bank claims returns will be driven by strong growth in global demand for Australian red meat. Macquarie Livestock Company will be headed by Alan Hayes, who founded and was chief executive of the Prudential Pastoral Company in the 1990s.
Hayes said Australia had a competitive advantage over the rest of the world when it came to red meat exports because of the country’s proximity to international markets, especially Asia, and the disease-free reputation of Australian meat.
“The fund gives investors the potential for equity-type returns but with the security of underlying real assets,” he said.
Australian agriculture has been hit hard by the longest running drought for almost 100 years, which does not appear to be easing. Hayes said, however, the geographic diversification of the proposed properties would negate the effects of the drought and decrease volatility.
“We plan to buy blue chip properties across three climatic zones in Australia. So, for example, at the moment Victoria might be experiencing a bad year, but the Gulf of Carpentaria is doing very well,” he said. Macquarie has pinpointed properties across Australia including in New South Wales, Victoria, Queensland and the Kimberley region of Western Australia.
Hayes added that not only did livestock investment have a low correlation to other major asset classes, but also beef and lamb had a low correlation to one another.
“Northern Australia is mostly dominated by cattle farming and the south is mostly sheep. They are sold into different markets,” he said.
The unlisted fund, which is the first of its kind to be made publicly available, could be floated on the Australian Stock Exchange within five years. Hayes said it could take up to three years to acquire and bed down a full portfolio of properties.
