PGGM plans divestment of Ukraine agrifund LP stakes

At least one LP reports intention to divest from NCH Capital’s Russia and Ukraine-focused agribusiness investments as quickly as possible.

At least one investor in an NCH Capital-managed vehicle plans to divest as a result of Russia’s invasion of Ukraine.

Dutch pension investor PGGM is an LP of NCH. Spokesperson Maurice Wilbrink told affiliate title Agri Investor: “As with all Russia-related assets, it is our intention to divest as quickly as possible. It is obvious that this is a difficult asset class to implement at speed.”

Wilbrink declined to comment on the status of specific investments in Russia or Ukraine and NCH declined to comment.

PGGM’s move is the latest example of GP-LP “uncoupling”, with London-headquartered Pamplona Capital Management last week saying it was “redeeming” the LP interests of one of its LPs which has ties to sanctioned Russian oligarchs.

The NCH Agribusiness Partners fund closed on $1.2 billion in 2007 with a strategy devoted to farmland and agribusiness in Russia and Ukraine. Investors included the European Bank for Reconstruction and Development, which extended working capital loans of $50 million in 2009 and another $40 million 2014 to support crop farming projects in Ukraine, managed by NCH in Ukraine.

The EBRD continues to be an LP in NCH Agribusiness Partners II, to which the bank made a $20 million commitment in 2014. Spokesperson Anton Usov told Agri Investor that EBRD bankers working with NCH are being affected by the war.

“Realistically, I don’t expect we’ll be able to tell what the future holds for NCH and the likes and their investments. Not until the ceasefire, at least,” he wrote.

A 2018 report by non-profit GRAIN said Harvard acquired a 59 percent stake in NCH’s first farmland fund through $150 million in secondary transactions between 2009 and 2016. Harvard Management Company declined to comment and a Harvard University spokesperson declined to address the accuracy of the report.

Senior associate director for media relations Jason Newton told Agri Investor in an email a review has determined Harvard has “no direct holdings with Russian corporations”.

“Like all investors, we do not have complete transparency into every investment made by third-party managers, but we believe there are no material indirect holdings with Russian corporation,” Newton added.

Other NCH investors – including Case Western Reserve University, the Skoll Foundation and Mass General Brigham pension fund, among others – did not reply to messages seeking further detail.

A 2013 FAO report labelled NCH the largest private equity group invested in primary agriculture in the Commonwealth of Independent States grouping that includes much of the former Soviet Union. It noted NCH’s strategy involved balancing risk inside Ukraine by spreading its farms across a west-east axis.

According to an April 2021 regulatory filing, New York-headquartered NCH was founded in 1993 and manages $2.9 billion in assets from university endowments, corporate and government pension plans, family offices and high-net-worth individuals. In addition to agribusiness, the firm manages strategies focused on debt, private equity and real estate in Eastern Europe and Russia.

The firm’s principals hold substantial ownership interest in NCH Agribusiness Partners II, which owns a private commercial bank in Ukraine focused on provision of loans to farmers, according to the filing.

NCH wrote in the filing it aims to purchase and lease tracts of prime farmland and consolidate them into large efficient production units with modern farming techniques. The filing explains its agribusiness strategy targets markets where systemic shortages of capital and pervasive neglect of farmland have presented attractive opportunities, primarily in Russia and Ukraine.

The firm describes itself as being among the largest agribusiness owners and managers in the world, with a portfolio of at least 700,000 hectares comprised of properties in Ukraine, Russia, Romania and elsewhere. Its investments include Russian soybean producer AgroTerra, and AgroProsperis, which provides supply chain services to Ukrainian farmers.

NCH’s April 2021 filing noted Ukraine has been in the process of addressing the transferability of agricultural land after such transfers had been prohibited by a moratorium for more than 10 years.

“The removal of such moratorium is likely to create conditions that adversely impact the value of the fund’s investments in farming operations in Ukraine,” NCH wrote.

The filing also noted unique risks associated with investments in Russia, which NCH wrote include potential expropriation or nationalisation of assets, government intervention into foreign investments, confiscatory or punitive taxation, regional conflict and the imposition of economic sanctions.