Do You Know What Your Pension Fund is Doing in Africa?

Following the 2007-2008 financial crisis and the collapse of the housing market, private equity funds have found a new lucrative soft commodity market to invest in--farmland. In a short period of time, obscured from public view, the flow of private capital into farmland and agriculture has grown dramatically worldwide.

In recent years, the private financial sector has already invested between $10 to $25 billion in farmland and agriculture with little to no oversight; given current investment trends, this amount might double or triple in the coming years. Although agricultural funds are portrayed as positive social investment to help alleviate hunger and the effects of climate change, evidence demonstrates that large land deals are often detrimental to food security, local livelihoods, and the environment--yet little is known about the specific firms and funds driving this investment.

Betting on World Agriculture: US Private Equity Managers Eye Agricultural Returns, a new report from the Oakland Institute (OI), focuses on the private investment vehicles that advertise and manage investment opportunities in farmlands and agriculture for investors including pension funds, university and foundation endowments, and high net worth individuals. Based on months of research, involving literature review, interviews with fund managers, and examination of public as well confidential internal documents, the report casts a light on this hidden trend by profiling private investment vehicles that are either based in the US or aggressively promoting farmland and agriculture in the US.

Asking pointed and value-based questions that go beyond the usual terrain of yields and risks, the new report sheds light on the complex world of funds and investment activity and the ethical obligations involved. By doing so, the report highlights how these funds are managed and the type of investments that are being made in various regions of the world in order to inform concerned citizens, investors, and policy makers about the domestic and international impacts of such investments.

"The large buying power of these groups warrants an investigation into the overall impact of this investment activity on economic development, food production, rights of local communities, and the environment," said Caroline Bergdolt, coauthor of the report. "In addition, for those already promoting social and environmental returns to raise funds and garner special incentives from governments, demonstrating a lasting, meaningful impact should be a must. Yet, a lack of information prevails," she continued.

Considered the next big thing and "[farmland] gold with a coupon,"[1] with some funds aiming to become the "Exxon Mobil"[2] equivalent of the agricultural sector, there is much cause for concern. Within this context, it is particularly troubling that information regarding agricultural and land investments is highly inaccessible, densely layered, and hidden from the public.

In fact, of the 23 intermediaries researched and profiled, including Global Environmental Fund, George Soros, Farm Lands of Africa, and the Westchester Group and Teachers Insurance & Annuity Association - College Retirement Equities Fund (TIAA-CREF), only five responded to requests for direct contact after the Institute's repeated attempts.

"The fund managers are not forthcoming around details of investments and in general operate under a veil of secrecy. Some companies use reverse mergers with video game-sounding entities like 'Kryptic Entertainment' to create US-based public shells as well as onshore-offshore partnerships," said Anuradha Mittal, executive director of the Oakland Institute and coauthor of the report. "At best, fund managers give lip service to the belief that they are contributing to a win-win situation where they can make enormous amounts of money while contributing to food production and poverty alleviation."