Tag Archives: forestry
UK Forestry Returns On Fire
15 May 2013 by Andrew Shirley Posted in Farmland Market Commercial forests showed an average total return of just over 18% in 2012, according to the latest results from the IPD UK Forestry Index. Launched yesterday (14 May 2013), the latest instalment of the index, which has been running for 20 years, reveals that last year forestry comfortably outperformed most mainstream asset classes including equities (10.2%) and gilts (4.7%). On an annualised basis, forestry has delivered a return of 8.1% over the past two decades. This compares with 7.2% for equities and 7.7% for gilts. Many consider forestry to be a useful hedge for investment portfolios because of its limited correlation with more conventional asset classes. The three-year (23.9%), five-year (17.7%) and 10-year (16.3%) annualised returns appear to support this sentiment. Over the same periods, equities only managed to produce returns of 6.7%, 2.1% and 8.0%, respectively. Although this looks a strong performance, calculating the annual income return from the asset class is slightly more complicated, as IPD’s Mark Weedon explained to me and other slightly bemused launch attendees. Even though the value of timber sold last year accounted for 3.3% of the value of the 148 upland, mainly Sitka spruce, plantations – worth in total £221m and on average £2016/acre – tracked by the IPD Index, the calculated income return was actually -0.9%. This means the index’s performance is entirely down to capital appreciation. Mark said this seeming disparity is down to the unique nature of forestry investments. Even though felling and selling trees can produce a significant, if irregular, cash flow, the removal of the timber is, in effect, reducing the value of the plantations, hence the negative performance. While some investors may struggle slightly with this concept, the taxation benefits of owning commercial forestry are more clear cut. Income from timber sales is free of income and corporation tax, growing timber is exempt from Capital Gains tax and commercial woodland qualifies for 100% Business Property Relief after two years of ownership. The future outlook for forestry as an investment remains strong, according to the industry experts at the launch. There has been huge investment in timber processing facilities in the UK meaning more useful product can be extracted from each log. Demand for wood by the fast-growing biomass renewable energy sector has also doubled over the past two years. The ongoing weakness of Stirling also helps the export market. My colleague Tom Raynham, who advises funds and wealthy individuals looking to invest in farmland and forestry, says he has seen a rise in the demand for woodland as a long-term investment. “Like farmland, it is seen as a “safe-haven” investment that can offer not only significant tax advantages, but also lifestyle and amenity benefits. This makes forestry of particular interest to individuals and family offices. Knight Frank is currently selling a large block of woodland in south-west England that could appeal to investors.” Continue reading
New Forestry Investment Fund Launched
29.05.2013 A new fund has been announced that will focus on investment in forestry assets across Europe. The ForestCare Investment Fund is set to be launched by Diapason Commodities Management, which is a signatory of the Principles for Responsible Investment initiative and as such follows the guidelines relating to fiduciary duty. As a result, investments will cover forest properties and activities resulting from the industry, including forest management, wood production and processing. Furthermore, all potential investments will be subject to stringent checks with regard to sustainability, in particular their environmental, social and corporate governance impact. However, the fund will not restrict itself in terms of the type of investment, taking a number of assets into considerations, including equities, bonds, forest plots and all related derivatives. In an effort to take advantage of the comparatively low levels of private forestry ownership, ForestCare will include plots or land leases covered at least partially by forests exclusively in Europe. Forestry properties will form one-fifth (20 per cent) of the entire portfolio. On top of taking ownership of and managing forests across Europe, the fund will look to invest in shares or bonds of companies already operating within the forestry industry, providing they are doing so responsibly. Related derivatives and other investment opportunities within the forestry sector will also be considered, including biodiversity credits, carbon credits and REDD credits, which relate to efforts to mitigate the effects of deforestation. Mark McDonnell, managing director of Diapason Commodities Management, said: “ForestCare is a completely new way of approaching investment in forestry and with our approach to biodiversity in forests this investment opportunity has forest sustainability at its core.” “Crucially, the fund is structured to reconcile economic profitability with the need to make intelligent use of natural resources – providing investors with a diversified portfolio which is uncorrelated with other asset classes,” he added. Designed for those looking to invest in pension funds and institutional investors, ForestCare will have a minimum investment of €125,000 for the A class and €1 million for the institutional or I class. HD FestForest provides forest management in Estonia, Latvia and Lithuania and is a subsidiary company of HedeDanmark. Continue reading
Forestry Investments in Emerging Markets
the Netherlands – 30 May, 2011 Investments in forestry have many desirable features. Under certain conditions, forestry investments yield attractive returns to investors and can contribute substantially to the economic, social and environmental development of countries. Environmentally and socially conscious investors are actively exploring the “ins and outs” of forestry opportunities, motivated by opportunities that are profitable, but also in line with their core values. Between the 17th and 19th of May 2011, about 50 participants attended the meeting “Forestry Investments in Emerging Markets.” About one third of the participants were socially and environmentally conscious investors and investment advisors. Another one third of the participants jointly represented 17 investment opportunities in the tropical hemisphere, together worth over 95 million of investments in responsible forestry. The meeting took place in the Netherlands, a country with significant expertise in tropical forestry and a history of public and private investment in forestry in developing countries. The meeting was organized by FAO , the NFP Facility and Tropenbos International with support of the Business in Development Network , and the Ministry of Economic Affairs, Agriculture and Innovation of the Netherlands. The meeting was attended by institutional investors, investment advisors, timber funds, forest business developers, and forestry specialists. Selected NFP Facility partner countries attended the meeting. Participants from these countries included forest finance professionals that have worked domestically to identify promising business opportunities. Objectives of the meetings were to: Share perspectives on challenges and opportunities regarding the greater involvement of investors in forestry (REDD+, biodiversity, forestry) in emerging markets Showcase and discuss a variety of forestry-based business cases and fund structures as a basis to better understand the requirements and potential of such business cases and for collaborative work between potential investors and promising forest business initiatives in emerging markets. Contribute to an action plan to narrow the gap between investors and forestry opportunities. The interactive programme – consisting of plenary, panel and group sessions – provided and informal platform for exchange and engagement among participants. Seventeen businessfact sheets from seven countries provided the basis to discuss in concrete terms the risks and opportunities to invest in forestry in emerging and frontier markets. The cases included plantation forestry, natural forest management, processing and alternative businesses. In addition, several participants shared short notes on their work, which were contained in the information package. Publications Documents Presentations Contact Media Report: Forestry Investments in Emerging Markets Information package Business Factsheets Programme: Forestry Investments in Emerging Markets List of participants to the Forestry Investments in Emerging Markets event Continue reading
