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
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 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
Animal & Plant Species
CLIMATE & ENVIRONMENT