Many investors believe that the volatility within traditional investment markets is here to stay. Today, safety and stability are available within alternative investments, such as forestry. Unlike traditional equities and derivative based strategies, forestry assets provide minimally correlated returns, limited credit risk and an early market entry point. In the traditional markets it is necessary to accept a higher than market risk in order to outperform the indices. Forestry assets are real assets, with a long history of preserving and increasing wealth over the long-term. Investors are increasingly attracted to absolute returns, which are not market driven and commercial sustainable forestry is an ideal means to fulfil this need.
The global timber industry continues to experience significant growth, with an estimated demand for 1.8 billion cubic meters in 2010, and is expected to reach 2.1 billion in the next decade. The driving force behind the expansion is the increase demand, the global trend against illegal forestry, the Forestry Stewardship Council (FSC), and the growing population.
The benefits of investing in forestry funds:
- Forestry investments target above-average returns, unique asset-protection and represent a marketplace with a growing demand and insufficient supply
- While most assets are typically affected by interest rate fluctuations, earning projections or credit rating shifts, forestry assets are less sensitive to general drivers of global market turmoil
- Both the volume of standing timber and the unit price increases as the trees grow, should economic recession affect timber prices, trees can be left maturing for a few years until prices recover
- Average growth rates in Brazilian forests are seven times faster than in Northern Europe while production costs are a third lower
The risks of investing in forestry funds:
- The value of forestry investments and the income derived from them may fall as well as rise and investors may not get back the original amount they invest
- In general forestry investments are relatively illiquid when compared to other asset classes
- Forestry investments can be subject to valuation inaccuracy in the short term as forestry is a long term asset
