Timber is a natural resource that is in constant demand worldwide. Biological growth is what separates timberland from other investments and is estimated to be the most important return driver. The effect of biological growth is two dimensional; not only do trees grow in volume, their market value also continues to increase.
This is what makes agro-forestry an excellent investment. As an alternative to traditional stocks and bonds, the agro-forestry industry gives investors the opportunity to invest in green assets. With the continuous and progressive growth of the demand for timber, investors can see their wealth grow in time while promoting the sustainable route for investments.
HISTORICAL PERFORMANCE OF AGRO-FORESTRY
Agro-forestry investment has proven returns and has performed more solidly for over 30 years in comparison to more traditional investments, such as stocks and shares. In terms of high returns and low risk investment, agro-forestry products consistently demonstrate attractive, sustainable characteristics whilst having a negative correlation to these other types of investment; agro-forestry is recognized as the only asset class to have risen during three out of the last four market collapses of the 20th century.
WHY DOES AGRO-FORESTRY DO SO WELL?
- Trees are not affected by financial market sentiment
- Trees physically grow, increasing in size and value
- Timber is a renewable resource and global commodity
- There is a multitude of end user markets that rely on timber including; construction, office supplies and energy markets, amongst others
- Timber related by-products are also important (E.g. toughened glass uses resins from Balsam fir trees as transparent glue)
- Trees do not have to be harvested if market prices are down. This means that although the return on investment may be delayed, investors can avoid taking a loss on projected returns; (ultimately storing the commodity “on the stump” does not incur costs of storage fees and moreover the commodity continues to increase in mass and value).
THE INVESTMENT MODEL
GWD Forestry offers the investor an investment model which has been used over a number of years with great success. It allows the investor to invest directly into large scale agro-forestry projects benefiting from economies of scale, whilst substantialy reducing the investor’s costs. This model also benefits GWD Forestry as a company in the same light, making projects in close proximity more attractive to end user markets and reducing the company’s overall operating costs.
The structure of the investment is simple. As a GWD client you will be investing in the timber production over an area of project already under management. Investments vary from country to country, but typically an investment area (referred to as a “plantation unit”) will consist of approximately 2-3 hectares. GWD will manage and maintain the unit throughout the term of the investment on our investors’ behalf. Returns are derived from the harvest and sale of the produce of your allocation, minus our 10% performance fee.