Fund focus: 8F reels in $358m

Although Singapore's 8F Asset Management is an impact investor, it intends to deploy its debut fund largely in developed markets. Nevertheless, one third of LP commitments came from Asia, helping the vehicle surpass to a $300 million target to close at $358 million.

Part of this has to do with 8F's long-term plans for the region; the firm is wholly dedicated to building out an aquaculture business called Pure Salmon that will operate out of Japan, China, and Southeast Asia, serving a growing regional appetite for protein. Part of it stems from the idea that the tech-enabled, land-based fish farming concept holds its own as a financial investment, not just an impact project.

"You can't find too many projects in this sector where returns are as compelling as the non-impact projects. There is always a trade-off on returns, which is not the case with the vision we're presenting," says Yoram Layani, a partner at 8F. "If you solve some of the issues that we're facing today – in particular when it comes to energy, food or water – then the company will become very valuable tomorrow."

Aquaculture only

According to the World Resources Institute, every ton of salmon produced in aquaculture creates up to 145 pounds of nitrogen waste and 23 pounds of phosphorous waste. With 90% of world marine fisheries overfished or fully fished, Pure Salmon aims to help solve the shortage by producing locally sourced, sustainable fish in a controlled, traceable environment that replicates the positive qualities of a natural habitat as closely as possible.

8F Aquaculture Fund I will support development of 40,000 tons of salmon production a year, with total target capacity of 260,000 tons in the coming years. Monetizing this output is not expected to be a problem given the size and trajectory of the market; global salmon consumption came to 3.7 million tons in 2018 and is expected to hit 4.7 million tons in 2024.

"Pure Salmon is a 50% EBITDA margin cash generation business, so even without the sustainability angle, it would attract investors," Layani adds. "Some of our investors' principal perspective in conducting due diligence on the project was focusing on the financials."

Specialization is a key theme for 8F. The firm, which also operates from bases in Hong Kong, the UK and Germany, is dedicated to achieving positive social and environmental impact through private equity investments in vertically integrated aquaculture production and processing facilities.

Pure Salmon is implementing this agenda by taking a unique water recirculating technology acquired and developed in Poland and scaling into other markets. The technology is said to drive significantly reduced costs versus traditional sea-cage farming, while ensuring products can be marketed as free of antibiotics, hormones, pesticides, and micro-plastics.

"We did not want to raise blind pool funds in the traditional sense, whether they were sector funds or country funds," says Karim Ghannam, a co-founder and partner at 8F. "We felt that to have the outsized returns that are necessary for private equity, we needed to build businesses, to some extent, from scratch. And then those businesses would partner with existing proven technologies to disrupt an industry. What you're seeing us do today is a blueprint of what we could do in the future across other industries."

The single-project strategy is also seen as facilitating fundraising by giving LPs a more transparent and easily understandable view of how capital will be deployed. Indeed, as impact investments become more commercial and innovation-oriented, this approach may establish itself as the norm in sustainability-focused fundraising.

"You can expect that what we're doing here, you will see more of it in the future because investors will need new financing structures for these types of impact projects," Layani says. "Traditional financing structures won't necessarily work to build impact projects."

8F is wasting no time spearheading this vision with plans to launch two additional funds simultaneously in the next few months. These will include a China vehicle of $650-700 million to establish 100,000 tons of salmon production capacity and a Southeast Asia vehicle targeting $90 million for a 10,000-ton facility in Brunei.

"For what we're trying to do, Brunei is perfect," Layani says, flagging a partnership with the local government, a national reputation for pristine waters and a strong domestic skills base in aquaculture. "It's central to Southeast Asia, so we can easily reach all the markets we're targeting. But the difference to the other countries is the land is cheaper and available, which is a key issue in Asia."

In the pipeline

Like the debut fund, the two new vehicles will be used exclusively to develop Pure Salmon operations, including all aspects of quality assurance and brand management, along with production, processing, and distribution. Administrative fund formation processes are expected to be completed in April, with a formal launch soon after. Asian investors in Fund I are said to have already made initial signals of interest. 

The upcoming funds also offer further insight into the 8F specialization philosophy in that they allow LPs to back a global plan even if they may only be comfortable investing in their more familiar regional markets. Meanwhile, the Asian focus highlights a strong perception of aquaculture as a sector that plugs readily into themes around food security, food safety, and rising affluence in developing markets.

"In every market we've looked, the government has given us a lot of incentive to come and produce in their country," Layani says. "Everywhere we go we are getting help from grants and subsidies for our projects. That has been the case in Japan and the US, and it's going to be the case in China and Brunei."

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• Topics
• Southeast Asia
• Growth
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• Agriculture
• Asia
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• Impact investment