Tony Lovell, how the $ 100M SLM fund handled the six driest years on record

A check-in interview with Tony Lovell, co-founder and CEO of SLM Partners an asset manager that acquires and manages rural land on behalf of institutional investors, to scale up regenerative, ecological farming and forestry systems.



Listen to the previous interview with Tony Lovell here

We interviewed Tony before in October 2016 as the second interview ever on this podcast, and we were very happy to check in with him again and see how things have developed in the last almost three years.

SLM’s fund thesis is to double carrying capacity and half the cost of production, be a large scale, low cost producer of high quality grass fed protein.

We talk about:

  • the carbon project of SLM
  • how they handled the six driest years on record
  • what they did during those years
  • how to match stocking rates to carrying capacity
  • what you do when the rain finally comes
  • how SLM was going broke slower than anybody else

It takes time!

Tony Lovell
Investors in regen ag need to have an overall picture that’s at least a 15 year investment horizon. So when they start there in 15 years and they probably need to look at it in year 5, in year 10 and not worry about in the middle.

Another interview about SLM Partners with Paul McMahon



Tony Lovell:  SLM partners stands for Sustainable Land Management. So we started in 2012. Raised seventy five million dollars from a Danish pension fund, another 30 million dollars worth of finance from an international bank, Rabobank, an incredibly supportive agricultural bank. Both those groups are very, very supportive of the agriculture.

Tony Lovell: What we did was we acquired large areas of, what we described is inherently, good quality country that had been degraded by inappropriate management, unintentional but inappropriate management. And as a result of 150 years of set stocking in a seasonally dry, erratic rainfall and ecosystem productivity, production, performance, biodiversity, everything had gone south, had reduced. So the intention was to acquire that property and spend money on infrastructure, water, fencing, upgrades, and then change the grazing management with the intention to over the life of the fund, a 10 to 15 year fund. We also said that we would, as the opportunities arose, monetize, I don’t like the term, ecosystem services. So carbon offsets, water and air quality offsets, whatever came available. Biodiversity credits and we’ve been able to do that as well. So that’s the basic taste of the fund. Very simple process: buy the land, do the infrastructure, change the management and allow nature to recover and bring back the productivity that land inherently is capable of.

Tony Lovell: Okay, well. The total amount of land that we have in the fund itself is four hundred ninety thousand hectares actively developed with water and fencing, and the infrastructure itself is about half of that 220.000/ 240.000 hectares and they have a hundred thousand hectares is large scale in Australia. Mulga is a legumeness native tree and it’s a carbon project.

Tony Lovell:  The land that we’ve got is, in terms of holistic management talk, brittle tending. So it’s erratic and unreliable rainfall patterns and long term averages. Long term average rainfall for the country we got is around at 375 millimeters a year. But that can vary widely. We bought in 2012 off the back of two very good seasons. Our country also gets beneficial flooding. So we’d had two very good seasons. Unfortunately, with conventional management the benefit that we should have received from that was pretty much ephemeral and didn’t really run through.

Tony Lovell: So we then ran into six of the driest years on record. What that means is the first year is tough. The second year compounds off that keep going for five or six. And it gets pretty challenging, to put it mildly. The decision we made was, I don’t describe it as destocking, we match our stocking rates to our carrying capacity.

Tony Lovell: We have probably in the last three to six months actually had some reasonable rain, we had between 19 and 130 mils. We are still a long way short of where we. We would like to be long a long term average basis, but that was combined with some beneficial flooding as we speak on the land that we’ve got that receive the beneficial flooding. We are back up to just shy of 5000 cattle.

Tony Lovell: So on the ground. The interesting thing has been the staff, our team have been very positive the whole way through because they can see the benefits of the decisions we’re making. They can see that playing out on the land. And especially after we did get the rain event and the flooding that came through, it is noticeable. The difference in response of our country managed appropriately or managed the way that we consider to be the correct way to manage it compared to conventionally managed country over the fence on our neighbours properties.

Tony Lovell: The interesting thing is on. On the land itself. And I probably somewhat facetiously describe it to some of the people who were asking about how we were going, some of the neighbors, I said the way I describe it is we’re going broke slower than anybody else. We weren’t making money because we had no stock, obviously, but because we weren’t feeding and we weren’t degrading our ecosystem.

Tony Lovell: We were holding our own. And we were actually in a position that when the rain did come. The very interesting observation from several of their managers and you could see it on the land was that our land had far less runoff. So this is land that has been passed and desperately looking for rain for five or six years. And when the rain event did turn up, the amount of land that rejected that rain was. Terrifyingly disheartening. It was just shocking, that nice, steady, gentle rain. But it ran off because the land had been so degraded that it was unable to accept that rain when it arrived. We had very little runoff in our country, which means that what we did was we got the benefit of the moisture when it did turn up. That will take time to build on that again and again. But you start to build an eco system that actually accepts the moisture when when it’s available, whereas in a lot of cases, a lot of these seasonally dry ecosystems that have been so degraded that they actually reject the thing that they most desperately need when nature does provide it, which is fairly perverse, but unfortunately, reality.

Tony Lovell: I think that the gap you’ve got is between a project’s size that makes sense. From the third party, managed like and an SLM to run where you have to have a certain amount of capital involved to be able to generate enough fees to be able to pay for the people that need to be there to run the project so that a certain minimum size and how you balance that minimum size up with a project that makes sense with the requirement for the larger institutions to have to be able to deploy their capital in big chunks.

Tony Lovell: So some of these multi-billion dollar institutions, pension funds and high net sovereign wealth funds, et cetera, want to be able to write a single ticket of a hundred million dollars or five hundred million dollars. But they don’t want to be the only investors, which means they are looking for investable products. That’s 250 to 500 to a billion dollars, which is pretty hard to make sense of in the regenerative space.

Tony Lovell: The biggest constraint is probably. The gap that you’ve got is somebody coming into investing in regenerative ag. There is a transition period. So for investors to come into the program, what they’ve got to do is really have a reporting time frame. They’re going to have an overall picture that’s at least a 15 year investment horizon. So when they start there in 15 years and they probably need to look at it in year 5, in year 10 and not worry about in the middle.


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The above references an opinion and is for information and educational purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.

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