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The Harvard Management Company adjusted its natural resource portfolio this week by purchasing a minority stake in produce company Westfalia Fruit International and selling its investments in two Australian farms.
HMC — the University’s investment arm — manages Harvard's endowment, which is currently valued at $40.9 billion. HMC’s natural resource investments, which comprised 4 percent of the endowment, saw 12.4 percent losses in fiscal year 2019, compared to 6.5 percent returns on all investments that year.
HMC aimed to “refine” its natural resources assets after the endowment’s value dropped almost $2 billion during the 2016 fiscal year. HMC CEO N.P. “Narv” Narvekar wrote in the University’s Financial Report for Fiscal Year 2019 that one of the company’s goals was to “reduce our exposure to natural resources.”
Since Narvekar took over as CEO in Dec. 2016, HMC has decreased its natural resource assets by more than half. In the 2019 financial report, Narvekar wrote that HMC “completely rebuilt” a team to manage these investments.
Westfalia Fruit — a multinational company specializing in avocado production — announced the sale to HMC in a press release on Friday.
“The decision to partner with HMC was an easy one, given our similar values and commitment to sustainable business principles,” Alk Brand, the CEO of Westfalia, said in the release. “This transaction positions us well for pursuing strategic objectives within the global Group and significantly contributes towards our vision of being a leader in the global avocado industry.”
HMC’s Managing Director of Natural Resources Colin Butterfield said in the release that HMC is “excited” for the opportunity to work with Westfalia.
“Westfalia is a global leader in the avocado market with a commitment to environmentally sustainable management,” Butterfield said. “Its vertically integrated operations are uniquely positioned to benefit from the growth in global avocado consumption and make it a great fit for our portfolio.”
Vertical integration is a strategy where companies own the supply chain for their products. Westfalia’s vertically integrated supply chain allows them to “grow, source and ripen, pack, process and market quality avocados and other produce – across the year and across the globe,” according to its website.
Andrew A. Whitman — the Director of the Sustainable Economies Program at Manomet, a nonprofit research organization that focuses on sustainability — cited vertical integration as a reason Westfalia is a “quality investment” for HMC. Whitman said vertical integration allowed for products to become “more profitable” and “more resilient, in terms of things like climate change.”
In addition to its investment in Westfalia, HMC sold its investments in a cotton farm and almond farm in New South Wales to to the Boston-based Hancock Agricultural Investment Group for more than $120 million Monday, according to the Australian Financial Review.
The continuous properties cover around 77 square miles and include cotton, wheat, barley, and canola crops, as well as an almond orchard.
Whitman said HMC may have sold these investments due to water scarcity in Australia.
“Australia is, in some areas, something of a water challenged environment,” he said. “My hunch is that it's making a lot of investors review their investments there carefully to understand whether or not they're well situated to continue in that environment.”
Despite the challenges, Whitman said the properties are not necessarily “bad investments.”
“It may be that Harvard found that they were not well positioned to make the most of those investments,” he said.
So far, HMC has sold over $1.1 billion of “good, but misaligned” natural resource assets to “more appropriate investors,” per the 2019 report. Narvekar wrote in the report that HMC expected to close on the sale of “close to another $200 million” of these assets in the remainder of the fiscal year.
Correction: Jan. 23, 2020
A previous version of this article stated that Andrew A. Whitman is the the Director of the Stable Economies Program at Manomet. In fact, he directs the Sustainable Economies Program.
—Staff writer Ellen M. Burstein can be reached at email@example.com. Follow her on Twitter at @EllenBurstein.
—Staff writer Camille G. Caldera can be reached at firstname.lastname@example.org. Follow her on Twitter @camille_caldera.
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