31
Variable
100%
21% of directly held investments on the
register being located in Germany (it
should be noted here that these are all
from the same provider, but are different
versions of a similar investment product).
Exotic locations such as Brazil (17%), Costa
Rica (12%), Sri Lanka (10%) and Thailand
(19%) make up the majority of the sector.
#4 RETURNS
Returns from forestry vary widely and
can often be extremely hard to accurately
predict. They depend on a number of
factors, such as tree growth, land values,
timber prices and quality of the harvested
timber. Harvesting costs and transport can
also have a large impact.
Every investment offers a variable or
predicted return, which vary from as
low as 5.3% to as high as 180% per year.
5.3% sounds realistic and achievable,
whereas 180% could be seen as extremely
speculative. Overall, the median return on
offer was 17.76% and the mean return was
28% per year.
#5 MINIMUM INVESTMENT
The minimum investment is important
as it shows how accessible forestry is for
investors. This is particularly true for the
retail market, where investors may only
want to allocate a very small part of their
portfolio to alternative investments.
The lowest entry level is £2,000 and the
highest as much as £40,000. Sapling
investments tend to start lower, as the
investor is taking on more risk and is
likely to be invested for a longer term. The
average (mean) investment required across
the sector is just over £12,000, which
means forestry is more accessible than
other esoteric investment sectors such
as property which tends to have a much
higher minimum investment requirement.
81%
2011
6%
2012
16%
2013
SECTOR
GROWTH:
RETURNS
(2014)
It is not just potential returns that
vary widely. Due to the different tree
species, investment terms and choice
between established trees or saplings,
the frequency of when returns can be
expected also varies. One investment
offers returns annually from year one, with
a number offering returns after 2 years. In
most cases investors would have to wait
until year 12 for the first substantial return
from the investment.
MINIMUM INVESTMENT
EXIT
Highest Minimum
Investment Level
£ 40,000
Average
£
12,348
Lowest Minimum
Investment Level
£ 2,000
(2014)
(2014)
#6 EXIT
Directly held forestry investments do not
offer a defined exit strategy. For 97% of
investments the exit relies purely on the
sale of trees planted on the plot. Investors
are technically free to sell the trees as and
when they see fit, but can leave this in
the hands of the management company.
The longer the trees are left to grow and
mature, in theory, the higher the returns
should be. 3% of investments contain a
fixed term leasehold, creating a long-stop
date for the investment.
The shortest advertised investment term
is 2 years for mature trees. The longest is
49 years for a sapling investment, with the
average term across the directly held sector
(sapling and standing timber) of 15 years.
Anyone considering investment into a
directly held forestry product should be
made well aware of the speculative nature
of the exit and the different factors that
can have a large impact on returns.
Sale of trees
97%
Leasehold
3%
