KEY POINTS:
The new face of a private capital fund seeking to raise more than $60 million for New Zealand farms and agri-businesses is dubious about how long the dairy boom expected to enhance its returns will last.
Stuart Nattrass - a director of Fonterra and a number of agricultural industry bodies - starts this week as chief executive of the Agri Private Capital fund, launched in May by Westpac subsidiary BT Funds Management and specialist farm equity manager AGInvest.
It was established so the public could invest in the agricultural sector, with the aim of achieving annual returns of at least 15 per cent from a portfolio of "high potential pastoral farms" and small- to medium-sized agri-businesses.
Much of the fund's returns are expected to be based on the continued appreciation of rural land prices, fuelled in part by the meteoric rise of global dairy commodity prices.
However, just after fund spokesman Andrew Watters said Fonterra's final payout for the 2007 financial year made "the rationale for investing in the fund even more compelling", Nattrass has expressed doubt on the continued rise in dairy prices.
"My view is that New Zealand is perhaps a little bit over-enthusiastic about the dairy story just at the moment because it's difficult to see these commodity prices being sustained," he said.
Watters, the principal at AgInvest, has repeatedly pointed to the massive boost in Fonterra's dairy payouts as proof a "structural shift in the supply and demand for food" was under way.
Nattrass said while it was possible Fonterra's raising the final payout from $4.35 per kilogram of milksolids to $4.46 might make the fund more attractive, the continued strength of the dairy boom had yet to be tested.
The offer, which closes on Friday, has provisions to exceed $60 million. Current interest indicated it should reach that level, said Nattrass, as contributions usually came in right at the end.
The fund plans to invest half its capital in "high potential pastoral farms" and the rest in small- to medium-sized agri-businesses.
Nattrass sits on the boards of New Zealand Wool Services, the Wool Industry Network and Deer Industry New Zealand.
