U.S. pension funds are turning to farmland to harvest better returns at a time when other asset classes are underperforming.
According to a recent article in Pensions & Investments, major public pension funds in the U.S., such as The Iowa Public Employees’ Retirement System and the Oregon Investment Council, are committing millions to farmland investments or farmland in a real estate allocation.
Farmland produces income and a 7% to 10% return expectation—it’s also a natural inflation hedge with low correlations to other asset classes. As investors put more money into the asset class, the NCREIF Farmland Index is climbing rapidly—at the end of last year, the index represented $2.9 billion, up 107% from the fourth quarter of 2006, when it stood at just $1.4 billion.