Gresham House announces £15m first close of Forestry Fund

Richard Davidson, formerly chief investment officer and chief european equity strategist for Morgan Stanley, will manage the Fund with support from the Gresham House dedicated forestry team.

The Fund will target net returns of 10 per cent per annum, which includes an expected annual income distribution of 2 per cent to 4 per cent from timber sales.

The Company is targeting a final close for the Fund in H2 2017 at a size of £50.0 million.

As its cornerstone investment, the Fund has contracted to acquire a portfolio of five forests in the West of Scotland for c. £12.1 million.

The Fund’s limited partnership structure enables UK investors to benefit from the significant incentives associated with direct ownership of UK commercial forests: Income from timber sales is tax free, there is no capital gains tax on the increase in the value of the standing timber, and no inheritance tax after two years of ownership.

Rupert Robinson, Managing Director of Gresham House Asset Management, said: “We are pleased to launch the Fund and encouraged by the increasing level of interest from investors. Forestry as an alternative asset class is growing in popularity amongst institutional and private investors. As investors increase allocations to real assets, timber is being recognised for its compelling investment credentials: It is a physical asset that generates income, gives inflation protection, is lowly correlated to equities and bonds, and importantly, trees grow irrespective of whether financial markets are rising or falling.

“Launching the Fund is in line with our strategy to grow assets under management organically. It provides investors with access to a ‘green’ investment that has significantly outperformed equities, bonds and real estate over the last ten years and enables private individuals to pass on wealth from one generation to another free of inheritance tax.”

Richard Davidson, Fund Manager of the Gresham House Forestry Fund, said: “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. While once considered a niche investment, UK forestry is emerging from the shadows into the mainstream investment landscape.”