Tag Archives: alternative
Forestry Is One Irish Asset That Can Only Grow
In a volatile climate it can seem wise to follow the herd, but branching out into something different can pay off PATRICK LAWLESS – 09 JUNE 2013 RIGHT now, many investors are overlooking quality Irish assets – simply because these assets are Irish. They seem to think that, if an asset is Irish, it can only be a route to lose money and should be avoided. For me, that’s never a good enough reason. Where an asset is located is undoubtedly important, it’s nowhere near as important as the income it can produce and the price at which I can buy the asset. During the bubble years, some investors were rightly scared away because they felt the prices of many Irish assets were too high. At the time, I felt the same way. My firm, Appian Asset Management, moved to the sidelines of the Irish property market when property prices had escalated. Our clients missed out as prices continued to go up. But importantly, we did not lose money on Irish property when the market crashed. We advised clients to sell Irish property in 2006. We advised them to sell shares in Irish banks in 2007. But when a market experiences the type of radical change we’ve seen since 2006 and 2007, an investor who’s looking for value should always be prepared to change his or her mind in response. I’ve changed my mind on certain asset classes in Ireland. Irish commercial property – if a highly selective approach is applied – should no longer be considered off limits to investors. We think pockets of value are emerging in this asset class after 10 years of bad value and insufficient upside. The prices of quality office and retail buildings in central locations are now approaching levels that we think will be attractive to long-term investors. Appian recently made its first-ever investment in Irish commercial property. That decision was taken after choosing to avoid this asset class throughout the company’s 10-year history. Let’s not get carried away, however. Irish commercial property should only make up a small part of any diversified investment portfolio. The extent of price falls witnessed in recent years means, in some cases, it can cost less to acquire a building than it would to rebuild it. It means there are now attractive opportunities in this asset class and being highly selective is likely to be rewarded. Aside from Irish bricks and mortar, we’ve also changed our minds on an asset class that I once considered too obscure: Irish forestry. For nearly three years now, we have been studying forestry as a potential alternative asset. We now think forestry satisfies our criteria and will further diversify our investment portfolio without reducing the return we’re aiming for. Forestry has given good long-term returns with low volatility. It’s an asset class that appears to have demonstrated a low correlation with other asset classes – it doesn’t necessarily fall when other asset classes fall, nor does it necessarily rise when other asset classes rise. We’ve also identified it has a strong positive correlation with inflation. One of the things our clients worry most about is minimising the risk of losing money – suffering a permanent destruction of capital – while getting better returns than they can get at the bank. Inflation eats away at low-risk investments, so even if clients think they’re playing it safe by keeping large amounts of their portfolio in cash, over the long term any investment that can’t at least match inflation is going to hurt their buying power. Forestry has performed well in this context. If inflation picks up in the years ahead, it’s a sector that our analysis suggests is capable of continuing to match or beat the general inflation rate. Before we put any money at risk, however, we do a lot of homework. We held discussions with a number of potential forestry investments before we saw value. We believe it’s conservative but that it can deliver what we want it to deliver. As with any asset class, however, forestry has its risks. These include a potential lack of liquidity – forestry by its nature is an illiquid asset – but this risk can be reduced in a large portfolio with a diversified maturity profile of forests. Other risks include those that can be insured against – such as fire, flooding and wind – and those that cannot, such as disease. Another factor to consider is macroeconomic risk. This is limited in the case of forestry, however, as trees continue to grow irrespective of the economic cycle. Forestry managers have the option of reducing the levels at which they harvest stock in times of lower market demand. Since 1994, forestry has delivered an average of 5.65 per cent per annum with volatility below 5 per cent. Commercial forests cover an area of almost 15,000 hectares, and the expected forest maturity dates have a wide range, from relatively recently planted to potentially immediately harvestable crops, with a diverse regional spread. We recently committed 5 per cent of our flagship fund to invest in forestry and see merit in having a limited exposure to it. In a volatile climate like today’s, it can be tempting to follow the conventional wisdom and stay with the herd. However, following the conventional wisdom in the bubble years turned out to be a costly strategy. Ignoring certain investments – just because they relate to Ireland and ignoring the factors that really matter, such as price and expected return – could be a mistake. Patrick Lawless is CEO of Appian Asset Management. The views expressed do not constitute investment advice or investment research Irish Independent Continue reading
EcoPlanet Bamboo Chosen As The Exclusive Plantation Partner For Brazil’s PPP On The Industrialization Of Bamboo
Tom Saidak | June 4, 2013 In Brazil, Theo Groothuizen, Innovation Attaché of the Netherlands Consulate General in São Paulo and Eduardo Giacomazzi of FIESP , the Federation of Industries of the State of São Paulo, announced EcoPlanet Bamboo Group as the exclusive plantation partner for Brazil’s biobased bamboo industrialization PPP. Programa Biosfera represents a bilateral collaboration between Brazil and the Netherlands, and focuses on the industrialization of bamboo as a material that can assist Brazil in the shift towards such a biobased economy. EcoPlanet Bamboo states it has a proven track record that when produced sustainably, bamboo can replace current forms of unsustainable timber and biomass material for a range of industrial applications. Continue reading
Agriculture: Abundance Of Land Spurs Big Commercial Drive
http://www.ft.com/cm…l#ixzz2VRnoVe3v By William Wallis Olam, the Singapore-registered commodities trading house, owes its origins to cashew nuts and the dark days of military rule in Nigeria. This was when currency controls made getting foreign exchange a permanent headache. In 1989, the Indian group Kewalram Chanrai hired Sunny George Verghese, now Olam’s chief executive, to find a forex solution for its textile and chemical business in Nigeria. He did this initially by selling cashews on international markets. So began a long journey across dozens of countries and numerous commodities, which, in its latest iteration, has seen Olam launch an expansion from trading into large-scale commercial farming in Gabon. Olam’s plans to transform tens of thousands of hectares of forest into rubber and palm oil plantations are among the most visible signs of returns from the recent government drive to spur investment – long neglected – in agriculture. “In 2010, we started looking at Gabon differently, with a new government with clear priorities and looking for investment,” says Gagan Gupta, the 36-year-old manager of Olam’s expanding operations. “We wanted to do palm and rubber. The government wanted a special economic zone.” This included running a purpose-built industrial zone outside Libreville, where timber companies have begun processing wood to conform to regulations banning the export of unprocessed logs. Gabon is blessed with fertile soils and a favourable climate, which deliver some of the highest yields in the world for, particularly, rubber. Gabon’s big landmass – most of which is still forested – and low population density make it easier for commercial farmers to gain land titles and manage community relations than in many other African countries. This is at a time when global demand, lack of available land elsewhere and soaring food prices are driving the most significant push into farming on the continent by external forces since colonial times. As in other oil-rich African states, the focus on oil production in Gabon, to the near exclusion of other economic activity, has greatly reduced the role of agriculture over the years. For now, much of the country’s food requirements are imported from elsewhere in Africa and from Europe. The most visible evidence of the produce of local farmers can be found at market stalls along the country’s main highways. About 100km from the capital, Libreville, and beyond the bridge at Kango, the scale of things is now apparently changing. A short drive through secondary rainforest and you emerge into what must count as one of the fastest-growing oil palm plantations on the continent. Tens of thousands of four-foot-high plants stretch across undulating hills towards the horizon and on either side of numerous forested zones, where protected flora and fauna and sensitive local sites have been left alone (along with buffer zones to the surrounding rainforest). Mr Gupta says the cost of leasing land in Gabon is average for the continent. Labour costs are higher than average at a prescribed minimum wage equivalent to $300 a month. But he hopes that higher yields and the chance to operate the plantations using environmental and social best practice will compensate for that. “There is limited land available for certified palm oil. We can do socially responsible green certified oil here that will fetch a premium. You can’t get certified in Malaysia – here it is possible,” he says. The company is treading in the footsteps of Siat, a Belgian agro-industrial group that is part Chinese-owned, which took a more traditional route in acquiring state palm and rubber plantations about 10 years ago, and which has $600m expansion plans. Gert Vandersmissen, Siat Gabon’s general manager, says one of the biggest constraints to growth is the shortage of labour and the time it takes to get authorisation for visas for immigrants. Most of Gabon’s inhabitants live in Libreville, Franceville and Port Gentil and not everyone is keen on the hard labour associated with plantation work. Rubber prices tend to be sensitive to global financial conditions and, following the 2008 recession, they dipped to below the cost of production, according to Mr Vandersmissen. He maintains that yields in Gabon are among the best in the world and long-term prospects are good. Like Olam with palm oil, Siat is making a strategic calculation for the future. This takes into account rising demand for palm oil in Africa, the shortage of available land in other parts of the continent and the link that is emerging between palm oil prices and those of crude, because of palm’s potential to be converted into biofuels. Oil palms take at least three years to begin producing, and 12 years to peak over a lifespan of 25 years, so it is a long term bet. “We are riding structural changes,” says Mr Gupta. Continue reading
