Investment Thesis
Forestry is a proven asset class for institutional and private investors. Recent returns have been driven by rising land values and increasing timber prices.
The combination of value in a naturally growing commodity and the security of ownership of the underlying land provides investors with income and long term capital appreciation in a sustainable and tax efficient manner.
Negative correlation with other asset classes can provide extra diversification while helping reduce volatility.
UK Commercial Forestry returns have been very impressive over the last 25 years returning 9.2 % annually*.
*(source: IPD Forestry Commission annualised rates to YE 31.12.2018 and GH / industry sample data to 2021)
Commercial Forestry Returns
-
We realise value by harvesting the crop or disposing of the asset. Returns are driven by three component parts;
-
Biological growth of the crop
-
Increases in the value of timber
-
Increases in the value of land
Industry Trends
-
Increased demand for housing in the developed world
-
Increasing use of wood in construction
-
Rising consumption per capita in the developing world
-
Development of new timber markets
Tax Benefits
-
Tax free income
-
Tax free capital gains
-
Capital gains roll-over
-
No inheritance tax after 2 years of ownership
New Timber Markets
-
Timber pellets for their use in biomass energy generation
-
Smart packaging and Cross Laminated Timber construction
-
Traditional packaging changes - as consumers and governments continue to reduce the use of plastics
Secular Drivers Behind Timber Demand
TRADE & COMMERCE
Construction
Packaging
POPULATION
Furniture
Home renovation
Energy
Urbanisation
SCARCE RESOURCE
Animal & Plant Species
Woodland Naturalisation
Water
NEW MATERIALS
& APPLICATIONS
Smart Packaging
CLIMATE & ENVIRONMENT
Carbon Emissions/Credits
Recreation/Health
Biodegradability
Biomass
GROWTH
DRIVERS