Vice President of Capital Markets, Bonnefield Financial
While investing in farmland may not seem like a typical way to diversify an investment portfolio, Bonnefield Financial is showing how farms can be investable assets that can provide stability in uncertain times.
Agriculture is a booming sector and farmland is becoming a hot investment topic. “As a long-term real asset, farmland has attractive characteristics that intersect with a number of key themes we’re hearing about from the investment community,” says Andrea Gruza, Vice President of Capital Markets at Bonnefield Financial, an investment firm that invests in Canadian farmland through its four investment funds.
Many investors are seeking to diversify away from the volatility of traditional markets and looking at other options for long-term capital appreciation and wealth preservation. “Farmland is typically viewed as that kind of asset due to its historical appreciation and inflation-hedging characteristics,” says Gruza. And whereas traditional real estate investments typically come with a mortgage, she notes that, “Bonnefield’s model is completely unleveraged and therefore offers less risk and volatility exposure.”
Climate trends offer an opportunity for Canadian agriculture
Another factor gaining attention has to do with climate change. Unlike many other food-producing countries around the world like the U.S. and Australia that are increasingly adversely affected by climate events such as droughts and wildfires, Canadian agriculture is seeing some relative benefits from current trends. With unprecedented access to fresh water, lengthening growing seasons, and an increasing ability to grow new crops in northern latitudes, Canadian farms are poised to potentially reap higher yields and accommodate more crop choices. These higher yields and increased production drive farmland prices upwards.
Long-term and sustainable investments
Bonnefield operates on a sale and leaseback model. Commercially-minded farmers wanting access to capital sell some of their land to Bonnefield. They then lease it back and continue to farm the land on a long-term basis. Investors wanting farmland exposure — without having to own and run a farm — invest through one of the four funds.
The result is an investment option that keeps high-quality Canadian farmers on the farm, promotes sound and sustainable farmland management practices, and protects Canadian farmland — all while offering investors an attractive risk-adjusted return profile.
Bonnefield’s funds also incorporate environmental, social, and governance (ESG) principles, making them suitable options for sustainably-minded investors. “Since becoming a signatory in 2014, Bonnefield has received an annual ‘A’ rating from the UN-supported Principles for Responsible Investment,” says Gruza.