Asian Agri Capital, a Singapore private-equity firm that focuses on early-stage plantations, is seeking to raise $100 million to invest in palm oil and other tropical commodities in Southeast Asia and Latin America.
The Pacific Agriculture Fund will invest more than half of the money in palm-oil plantations in Peru, where the United Nations Office on Drugs and Crime has been supporting the cultivation of the crop and other commodities to provide former coca-growing farmers with sustainable incomes, said Bill Randall, managing director of Asian Agri. The manager, which has two earlier funds, will continue to invest in Malaysia, the world’s second-largest palm-oil producer, he said.
Malaysia could run out of land to grow palm oil by 2020 and Indonesia by 2022 because of “aggressive plantings” over the past decade and environmental concerns, according to an April report by Nomura Holdings Inc. Malaysia and Indonesia are the two largest growers of palm oil, crushed from an over-sized pineapple-like fruit and processed into oils used in cooking, packaged foods and in toiletries such as shampoo.
“We will invest a significant amount of our assets in Peru as opposed to Southeast Asia because there are just a lot opportunities there,” Randall said in an interview.
As the global population expanded 85 percent in the past four decades, demand for edible oils rose almost ninefold. Palm oil climbed to 3,967 ringgit ($1,328) on Feb. 10, the highest level in almost three years as global demand outstripped supply.
Asian Agri’s fund is targeting returns of 40 percent to 60 percent when it hands money back to investors in three to five years, Randall said. It plans to list the companies it invests in within the first two years of their operations, he said.
Asian Agri’s first fund gained 104 percent after fees and expenses last year, benefiting from investments in Asian Plantations Ltd., a palm-oil producer listed on London’s Alternative Investment Market, Randall said.
Asian Agri had invested in Asian Plantations, which grows palm oil in Malaysia, and helped it to list in 2009. Asian Plantations’ market value has increased to about 101 million pounds ($167 million) from 20 million pounds when it first started trading.
“Nobody can produce edible oil cheaper than a palm oil plantation in the tropical belt,” said Dennis Melka, joint chief executive officer of Singapore-based Asian Plantations.
Asian Agri, which has applied to change its name to Pacific Agri Capital, plans to invest about 70 percent of its new fund in Peru and other Latin American countries and the rest in Southeast Asia, said Randall, who lived in Venezuela as a child and speaks Spanish. It will make complimentary investments in cocoa and rubber plantations in Latin America and plans to open an office in Colombia this year, he said.
Oil vs. Narcotics
The Pacific Agriculture Fund, which has raised more than $8 million from small family offices and friends, is seeking to attract capital from institutional investors in the U.S. and Latin America, said Zack Kembar, a director of Asian Agri.
Asian Agri is teaming up with local palm-oil companies in Peru that are seeking capital to expand, Randall said. The UNODC is supporting co-operatives in the Andean nation, which last year rivaled Colombia as the world’s largest producer of cocaine after a government eradication program failed to stem rising cultivation of coca, the raw material used to make the drug.
“Palm oil has made money consistently for 30 years for its growers,” said Asian Plantations’ Melka. “I tell people that it’s the most profitable crop that humans can grow outside of narcotics.”