Tuesday, June 5th, 2012 - River Cattle Fund
The recent launch of a new cattle investment fund has created considerable interest as an innovative model for funding Australian cattle herds.

The River Cattle Fund invests in the cattle only, and partners with farmers to grow and/or breed them and is aimed at sophisticated investors and institutions.

Jim Rich, a fifth generation Queensland farmer who has put the fund together said he wanted to develop an alternative to the traditional path of trying to fund cattle through bank debt.

“A lot of farmers have too much debt already, and can’t fully stock their properties,” Mr Rich said.

“Traditional sources of finance have become more difficult due to the relatively high Australian interest rates, and the pressure on banks since the GFC to reduce their loan to value ratios.

“The River Cattle approach provides the landholders with a highly attractive alternative source of funds.

“Another factor that prompted the launch of the fund is the amazing level of grass right across the Australian cattle country, and that there is a lot of grass that is being wasted because farmers don’t have access to the capital to buy the cattle to eat it.”

Chairman of River Cattle, Bruce Tweedie, who also operates a corporate investment matching service specialising in agriculture said the concept is particularly attractive for investors seeking exposure in the agricultural sector.

“We are seeing an upsurge in investment interest from both Asia and Europe, partly because investors are keen to leverage the long term demand for food production generally and animal protein in particular, and partly because investors want to diversify into real assets,” Mr Tweedie said.

“The River Cattle model doesn’t invest in land so it has two distinct advantages for investors – it doesn’t require the very large sums of money that are often needed to purchase Australian land, and it provides a much higher degree of liquidity than most agri investments.”

Dugald Higgins of Zenith Investment Partners, one of Australia’s leading specialists in agri investment research, said generally the contention is that land is a stabilizing influence on returns being generated by investment into agriculture, which is generally correct because many commodities markets are inherently much more volatile than land price movements.

“What will not be generally appreciated by those outside the industry is that using a model which separates growing out livestock and the land means that you remove the burden of the capital infrastructure, and profit margins in livestock trading become much more robust,” Mr Higgins said.

Bob McKittrick from Logical Livestock Marketing, a marketing services firm focused on the beef industry said the venture has a lot of merit.

“It does rely heavily on the purchase costs, ability of the land to perform, particularly on the basis of the correct stock to suit the land type, the husbandry of the stock whilst under control of the landowner and most of all, the correct marketing choices at the conclusion,” Mr McKittrick said.

“If the landowners include their capital gain in their equation of profit at a sensible rate, it may allow all parties to share in making some money.”

Another unusual feature of the fund is the treatment of fees for the Management Company.

Mr Rich said he wanted to get away from investor perceptions that funds are vehicles for fee gouging.

“All three stakeholders, investors, landholders, and management, only get paid from profits,” Mr Rich says.

“This means everyone has serious skin in the game, and provides clear incentives to perform.

“We have also designed the fund so that the investors get a preferential base return out of profits, like an interest payment on their capital, before the other stakeholders get any share of the profit.”

For more about the River Cattle Fund contact Bruce Tweedie at [email protected]

Contact Profile

Bruce Nelson

P: 0423 403 449
M: +61 (0) 423 403 449
W: www.rivercattle.com.au/


River Cattle, Australia Cattle, Jim Rich, Bruce Tweedie, investments



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