23
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Poor management or fraud
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What if global demand for timber falls?
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Investor has currency exposure as a large number of
investments are made in Sterling (trees are generally
valued in USD)
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Disease, fire, flood or other disaster
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There is potential for political instability in a number
of plantation locations
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Changes to regulations for overseas ownership/
investment in plantation locations
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Forestry is an established sector for alternative
investors
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Global timber trade is very well established
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Standing wood has many advantages over growth
from saplings
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Strong global demand for hardwood
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Provides carbon capture and reforestation (ethical
investment)
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Diversification across a number of countries
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Potentially very high returns (but extremely wide
ranging)
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UK forestry has achieved an annualised total return
of 17.7% over the past five years (IPD UK Forestry
Index)
STRENGTHS
WEAKNESSES
OPPORTUNITIES
THREATHS
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No other sources of revenue – totally dependent on
timber market
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Land is susceptible to being over-priced in exotic
locations
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Little value in the land if the project is not a success
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Long investment time-frame - illiquid
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No annual payments - high percentage of returns
come at the end of the investment term
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Costs and taxes reduce the return to investors
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Information on insurance is vague
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Information on ownership (trees or underlying land)
can be confusing i.e. leasehold land, logging rights
to trees, ownership certificates
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Information on costs can be unclear - annual
management, insurance/security, harvest fees
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Information/detail on predicted returns is not
readily available – lack of evidence
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‘Too good to be true’ returns in certain cases
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Diversification from mainstream assets
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Long-term growth
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Hedge against higher inflation
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UK commercial forestry can be used as part of an
Inheritance Tax plan
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No income tax on harvested timber from UK
commercial forestry
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No capital gains tax (CGT) on the growth in the
value of the trees from UK commercial forestry
SWOTANALYSIS
