INVESTORS will soon have access to a new, regularly-updated Index which provides a measure of the investment returns being generated by Australian agriculture.
The Australian Farmland Property Index is being launched at the Australian Farm Institute Roundtable Conference in Brisbane on November 11. It shows an average return of 23.9 per cent consisting of 8.3pc income and 14.6pc from capital appreciation for the year to June 30, 2016.
Australian Farm Institute executive director Mick Keogh said the index would provide a regular indicator of the performance of the Australian agricultural sector on a regular basis.
“It help and encourage investors to include the sector as an important component of a balanced investment portfolio,” Mr Keogh said.
The index will be published quarterly, and will be based on the actual income and capital returns of a group of corporate farms that together total more than $827 million in total asset value. The quarterly performance of these will be aggregated into a single index.
Damien Webb, head of fixed income and real assets at First State Super, said as an investor in the agricultural sector he was encouraged by the development of the Australian Farmland Index.
“It will help bring transparency to the performance of the sector that is currently not available. It is a critical step in providing greater confidence to potential investors," Mr Webb said.
Australian Farmland Index coordinator Frank Delahunty said the index was based on the National Council of Real Estate Investment Fiduciaries (NCREIF) index which has been available for North American agricultural investors since 1990. The index will use the same methodology as that used for North America but with some small adaptions to accommodate some difference in Australian agriculture, he said.
Alex Crossing from CBRE Global Investment Partners in Singapore manages institutional clients’ investments in the Australian agricultural market.
“There are many reasons why the Australian agricultural sector is an attractive place to invest,” Mr Crossing said.
“One of the limitations has been getting access to good quality, timely and relevant information on how the sector performs. For the first time we will be able to compare the sector’s performance to other asset classes.
Mr Delahunty said over time the number of participants was expected to increase. That would enable the index to provide more detail across different locations as well as for example returns from buying and leasing farms to Australian farmers to operate compared to those investors who choose to operate, he said.
“There are strict rules around participation in order to preserve the confidentiality of those participating,” Mr Delahunty said.