Forestry investments ‘bringing top returns’
If your Christmas tree got you thinking about investing in wintry UK woodland, you might want to keep that thought at the forefront of your mind, because investing in forestry could well put you on to a winner.
UK forests are generally agreed to be good places to put your money. Figures on returns vary, but you should (and we say should) be able to expect healthy bang for your buck. Figures from the IPD Annual Forestry Index show a total return of 10.8 per cent for 2015, easily beating returns on many other asset classes.
It could be argued that professional investors have been a little wary of putting their money in forests. The initial investment is high, for one thing, generally meaning only very wealthy folk need apply. What’s more, forestry investment can be a waiting game. While returns can be significant, investors might have to wait years, even decades, to actually see any of the money.
And for non-professional investors looking for places to put their money, information on forestry funds could be hard to find – generally speaking, it’s not the sort of thing you see on well-known personal finance and money advice websites.
But things are changing a little.
“While once considered a niche investment, UK forestry is emerging from the shadows into the mainstream investment landscape,” Richard Davidson, formerly chief investment officer and chief European equity strategist for Morgan Stanley, told the Herald newspaper recently.
Mr Davidson is heading up a newly-launched timber investment fund over at the asset manager Gresham House.
“As a medium to long term investment, forestry is generally low risk as it is underpinned by unique return drivers: trees grow both in volume and value as they mature and a looming supply shortfall of timber in the UK will, we believe, push up timber prices.
“On top of that, renewable energy projects such as wind farms have provided an alternative income source. Unsurprisingly forestry’s historic returns, ESG credentials and tax incentives have piqued investors’ interest.”
Gresham House figures cited by the Telegraph highlight just how lucrative forestry investment can be: £6,500 invested in a fund would turn into nearly £3 million over its lifetime. That’s a yearly net profit of ten per cent.
“As an asset class, timber is continuing to surge in popularity and it’s not just institutional investors who are capitalising on the opportunities,” Rupert Robinson, managing director of Gresham House Asset Management, told the Telegraph.
“Increasingly, family offices and ultra-high-net-worth individuals are allocating more capital to differentiated and illiquid assets, such as commercial forestry.”
Money earned from timber sales is free of income and corporate tax, and, after two years, free from inheritance tax too. But remember that funds usually require large initial investments and returns can take years to generate. But if you have the money, the time and (more than) a little patience, it could well be worth it.