The White House released a statement announcing the establishment of a new farm investment fund on Thursday, July 24th. This new initiative is put together with the cooperation of the White House Rural Council and the U.S. Department of Agriculture, as well as private and public-private financial institutions.
The White House Rural Council will run the new $10 billion Rural Infrastructure Opportunity Fund designed to give pension funds and big investors the chance to invest in American agricultural projects. Projects to be financed include waste water systems, renewable energy projects and infrastructure development in underserved rural America.
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Statement from Agriculture Secretary
“We’re the eHarmony.com of infrastructure and business investment,” U.S. Agriculture Secretary Tom Vilsack said, making a humorous reference to the online dating service.
“We’re going to be a connector,” he continued. “This is a new role for the U.S. Department of Agriculture.”
Details on new farm investment fund
The Rural Infrastructure Opportunity Fund is backed by CoBank, a coop bank and a member of the Farm Credit System, a government-sponsored network of banks to support the agriculture industry. CoBank has committed the first $10 billion to the fund.
Capitol Peak Asset Management has been selected to manage the new fund’s investments and the Agriculture Department is tasked with helping find suitable projects. The statement said that investors will be able to make debt and equity investments in both individual and bundled projects. Investments will earn returns on principal along with interest.
Increased demand for agricultural investments
Since the 2008 financial crisis, significant amounts of pension money have flowed directly into farmland and agricultural investments seeking higher returns. Now hedge funds and large investors are also looking for those high returns, but relatively few vehicles for substantial agricultural investments exist. Faced with what Vilsack called “extraordinary” demand from local communities in rural America for capital, he began working on the idea of a farm investment fund.
Providing flexibility and diversification for large investors is why the new fund will offers investors the opportunity to put money into bundled projects. One area where agricultural infrastructure investment is desperately needed is in California, Mr. Vilsack noted, given the state is dealing with a record-breaking drought.
“There is a business opportunity there because people will pay for water,” he continued.