Re: Key Post: Investment in Irish Forestry Funds
Rather than take the promoters words at face value, I think it would be prudent before investing in tree farming via funds to check out the section on Returns from the Irish Farm Forest web site and check some of the references given: This says: Returns are expressed as real rates of return over and above the rate of inflation. There is a lack of published information on returns from investment in forestry in Ireland. Growing for the Future - A Strategic Plan for the Forestry Sector in Ireland estimated the real rate of return from forestry (Sitka spruce) as 5% including land cost and exclusive of grants and subsidies. Irish Forestry Unit Trust (IFUT) estimates the return from forestry as being within the range of 5% to 7%. At a conference on forestry investment organised by the Irish Forestry Industry Chain (IFIC), most speakers indicated returns in the region of 5 to 7% with the proviso that these could be higher if there was no land cost associated with the investment. Thus farmers planting their own land could expect significantly higher returns.
In summary returns are very much dependent on a combination of factors but most analysts indicate rates of return in the region of 5% to 7%. Returns are significantly higher where the investment does not require the purchase of land.
Rather than take the promoters words at face value, I think it would be prudent before investing in tree farming via funds to check out the section on Returns from the Irish Farm Forest web site and check some of the references given: This says: Returns are expressed as real rates of return over and above the rate of inflation. There is a lack of published information on returns from investment in forestry in Ireland. Growing for the Future - A Strategic Plan for the Forestry Sector in Ireland estimated the real rate of return from forestry (Sitka spruce) as 5% including land cost and exclusive of grants and subsidies. Irish Forestry Unit Trust (IFUT) estimates the return from forestry as being within the range of 5% to 7%. At a conference on forestry investment organised by the Irish Forestry Industry Chain (IFIC), most speakers indicated returns in the region of 5 to 7% with the proviso that these could be higher if there was no land cost associated with the investment. Thus farmers planting their own land could expect significantly higher returns.
In summary returns are very much dependent on a combination of factors but most analysts indicate rates of return in the region of 5% to 7%. Returns are significantly higher where the investment does not require the purchase of land.
Mask: I think AAM’s rules preclude comment on specific shares (i.e. PCL and RYN), but the iShares forestry ETF contains the shares of companies that are involved in timber processing and downstream activities as opposed to forestry, i.e. they are standard industrial companies, and as such, their shares are exposed to general stock market volatility: http://uk.finance.yahoo.com/q/bc?s=PCL&t=1y&l=on&z=m&q=l&c=wood.l So if you want to invest in timber as an asset class, direct investment in forestry companies should be considered. If a pure forestry ETF came out I’d switch to it, and I’d also keep an eye out for competition from forestry companies from Canada, Russia and (maybe) South America.