Forestry is a proven asset class for institutional and private investors. The combination of value in a naturally growing commodity and the security of ownership of the underlying land provides investors with a low risk asset, generating long term capital appreciation in a sustainable and tax efficient manner. Negative correlation with more mainstream assets classes ensures that forestry diversifies a portfolio whilst reducing volatility.
UK forestry has provided excellent returns, as shown by the independent IPD UK Annual Forestry Index, the latest version of which can be downloaded here.
Average annual returns from the IPD UK Annual Forestry Index during the past 23 years have been 9.0%, which compares favourably with more mainstream asset classes, even before taking into account forestry's significant tax advantages. Returns have been driven by both increasing timber prices and rising land values. FIM’s two established funds have provided returns of 12% and 11.7% respectively. Historical performance is no guarantee of future performance.
Timber prices are the key driver of returns. These are expected to increase in the medium/long term, driven by recovering demand in the developed world due to increased house building (and the use of more timber therein) and increasing demand in the developing world (as a result of both urbanisation and the strong correlation between GDP per capita and timber consumption per capita).
Globally, sustainable certified timber is increasingly demanded, shifting supply from natural forests to plantations in developed regions, which are a limited resource.
FIM expect timber prices to rise faster than the growth in consumption, as increasing pressure is placed on a largely fixed supply.
An increase in timber prices feeds through to higher land values, as the land becomes more economically productive.
Alternative uses for the land, including agriculture, sporting, leisure and conservation, combined with a finite resource, are likely to see land values rise over time. FIM constantly look to add value through other income generating sources, to improve returns to our clients.
Investors have the option to select the appropriate age class property to suit their requirements for income or capital growth over a specified timespan and to manage or liquidate the portfolio in response to market movements or cash flow requirements. FIM are able to access both on and off market opportunities to meet investors' requirements.
COMPETITIVE TAX FREE RETURNS:
UK forestry provides protection against many forms of taxation, substantially increasing returns for tax payers - click here for further details.
NO LIABILITY TO:
- Income Tax when selling the timber
- Capital Gains Tax on increases in value in the timber
- Inheritance Tax (once the investment has been held for two years)