Polar Star Management Ltd., which runs one of the best-performing African and Middle East hedge funds over the past five years, plans to start a private equity unit that will invest in agriculture to exploit rising demand for food.
The Cape Town-based firm plans to use its own money to buy small farms and processing companies in South Africa this year, then increase efficiency through consolidation and better management, said Murray Derksen, a director at Polar Star. It aims to raise 1.5 billion rand ($115 million) for the fund, which may also buy commodities such as grains, while targeting an internal rate of return of 8 percent to 12 percent, he said.
“We looked at the increase in corn demand globally, which is about twice South Africa’s annual production,” said Derksen, who spent a decade financing agriculture at Rand Merchant Bank, a unit of FirstRand Ltd., Africa’s largest bank by market value. “That growth will need to access land and infrastructure in Africa.”