Early in Ellen Ellison’s tenure as chief investment officer for the University of Illinois Foundation, she and some staff toured a university-owned farm at Monticello, 30 kilometers west of the flagship Urbana-Champaign campus. Ellison was pleased with the intricacy of a GPS-outfitted planting machine, which was able to track the variety of seeds used, measure their depth in the dirt, and record the exact number of these planted per acre.
Ellison is planning to make farmland roughly 10 percent of the1.8 billion endowment portfolio she oversees. Separately the university manages an extra $800 million, which also includes farms. This might seem like an obvious play to get a large Midwestern school—similar to the University of Texas System’s getting money from petroleum. According to campus lore at Urbana, the undergraduate library was constructed underground in part to avoid casting a shadow on an early experimental cornfield. But few universities are devoted to building up their ag holdings exactly the way Illinois is. To get a public university in a state with funding woes, “you’re always searching for new and innovative ways to skin a cat,” Ellison states. “I believe my conduit is agriculture. ”
Part of this plan is to draw more gifts of land. The university owns almost 17,000 acres of donated farmland, dotted across 25 counties in central Illinois, planted largely with soybeans and corn. Beginning in 2005 a contentious university coverage required tenant farmers to bid in their rental contracts every three years. The move was unpopular in the state’s farming communities, and land contributions dropped more than 80 percent under the average of the preceding 15 years. Ellison and the new dean of this faculty’s College of Agricultural, Consumer, and Environmental Sciences, Kimberlee Kidwell, working together with school officials, got the coverage changed in September so the university can consider factors aside from the rent, like how long a tenant has been working the land. It’s too soon to say how large the effect this will have, however, Kevin Noland, who oversees real property for the base, states it’s seen more interest from folks considering farmland presents.
As a monetary advantage, land has done well for U of I. Despite weak gains in the last few years, the holdings have established an average 10.2 percent annual return over the last ten years, more than double the 4.7 percent return of the whole portfolio. They also provide some diversification. When the endowment’s investments were down 20 percent throughout the fiscal crisis, farmland was up 10 percent. Justin Ourso, managing director of Nuveen Natural Resources, a part of money management company TIAA, states farmland can be an inflation hedge. “The end product is a must, not a luxury,” he states. The dangers: Climate change may mess harvests, and farmland isn’t even a liquid advantage—it might be tough to find a good price in the event the university ever wants to market in a cash crunch.
Ellison says she wants to build the case of Stanford’s success with venture capital, leveraging the expertise of Illinois alumni and professors, including those from its renowned ag school. “Let’so do what we actually know about,” she states. “We have a means of sourcing new ideas long before everyone else is paying attention. ” In addition to land, the portfolio invests in agriculture-related private equity. Ellison recalls one alum who desired her to earn a venture capital investment at a bunny—only one cow—that would create more milk. If that’s the circumstance, she diminished.
Similar institutions with heavy agricultural roots are somewhat more careful about holding farmland as a strategic investment. “We don’t believe we have the expertise to handle it,” states Brian Neale, who oversees investments for the $1.2 billion endowment of this University of Nebraska Foundation. The Lincoln-based base is exploring some farming investments through private equity; Neale says he’s considering an investment at a California almond farm.
One other school with significant plantation holdings is Whitman College, a 1,400-student liberal arts school at Walla Walla, Wash.. Its endowment manages 24,000 acres near its campus, including 15 farms that grow legumes, garbanzo beans, canola, and three kinds of wheat, says Justin Rodegerdts, director of investments. A few of the garbanzos end up at Sabra hummus, and much of the wheat goes to Asia. Agricultural revenue contributes roughly $1.6 million annually to help operate the school. On a single 6,000-acre farm, soft white wheat—utilized to earn confectionery items such as biscuits—develops alongside some wind farms that also create returns.
“ ;We now have access to a lot of specialists in wheat farming and wheat management,” Rodegerdts states. “Getting them on our farm board helps us govern and hire good farmers that take care of this land. It’s been a good financial return for your college, and it is a double win. ”
Read more: http://www.bloomberg.com/