Timber grown in emerging markets is a gem for contemporary investment portfolios, offering growth, sustainability, balance and decent returns for moderate risk - much like the new, sustainable, plantation hardwoods that underpin it, says investment manage

PRESS DISPENSARY - Monday, Dec 21, 2009 - Timber grown in emerging markets is one of the lesser known, potential gems of contemporary investment portfolios, offering growth, sustainability, balance and decent returns for moderate risk - much like the new, sustainable, plantation hardwoods that underpin it. This is the message of forestry management company Ecoforests (also known as EcoBosques), which develops sustainable, ecological forestry investments and plantations, particularly in high fertile, deforested lands.

The investment strength of the sector was made clear in New York in October 2009, at the Sixth Timberland Investment World Summit, where senior delegates from major institutional investors such as Credit Suisse, APG Asset Management and Brookfield Asset Management joined analysts, economists and timber specialists from such bodies as the World Bank, to examine their clear attraction to the sector.

Chip Dillon, managing director at Credit Suisse, looked at the history of real returns over the last 25 years, showing how institutional investment in forestry has risen from a mere $1bn in 1985 to some $60bn in 2009 and an expected $65bn in 2010. Returns nowadays are lower than their 20th century zenith of 14%-15%, as land values have risen, but emerging markets - as diverse as Latin America, Russia, China, Australia and New Zealand - offer strong new investment opportunities with significant returns and only moderate risk.

Latin America offers a history of legal security even if investment frameworks can sometimes change for the worse - Brazil's new 2% foreign investments tax in early October 09 being an example - but countries such as Costa Rica, Argentina, Honduras, Chile and Uruguay are more attractive because of their true stability, protecting investors' property for 50 years under legislation drafted with the assistance of the World Bank.

Forestry's non-correlation with other asset classes attracts large investors. As APG portfolio manager Sue Ryan Goodman recalled at the summit, APG Investments started to research the sector in 2006 and by March 2007 had opted for a 1% asset allocation in forestry: a pension company that manages €205bn for 400m clients, its principal reason was that - based on its own studies - 61% of the return generated in forestry is based on the 'biological hedge' (the natural growth of the tree), which is unique to the sector and a great portfolio stabilizer in volatile markets. And taking a longer view, according to the NCREIF Timberland, forestry returns outperformed S&P 500 for the 10 year period ending in 2002, returning a solid 9.9%.

Some of the returns' solidity comes from the dwindling supply of (and prohibitions on) 'old' teak from South East Asia and the growing demand for 'new' plantation-grown teak from Latin America. Contrary to some expectations, teak is a fast-growing tree which can reach usability for furniture in as little as 13 years.

As the forestry investment industry expands, a key factor in successful investment is the choice of forestry manager. This was the message from Reid Carter, managing partner in Brookfield Asset Management, one the leading property management companies in Canada.

EcoForests - a sponsor of the summit since 2007 - is a boutique forestry investment manager headquartered in Spain and Canada, with offices in England, Northern Ireland, Sweden and Portugal. Its FSC certified plantations are located in Costa Rica and Argentina.

Michael Ackerman, senior adviser for EcoForests, explains: "EcoForests is about the management of hardwoods trees - such as teak, mahogany, oak and eucalyptus - which have fast growth and high value, but can also be produced sustainably, with ecological and social responsibility. Our business model offers low risk and high-yield profitability without a guilty conscience."

He continues: "We have the expertise to manage these high class timber species based on our consortium members' 40 years plus of proven track record in the Latin American region. And we actively make the most of our clients' forests for more than just their timber: our variety of other services maximize returns before, during and after the trees are harvested."

EcoForests itself invests in sector research, such as the 2008 Forestry and Carbon Sequestration Feasibility Study conducted by Mackinsey and Co. and commissioned by The Clinton Foundation, which produced reassuring results about the productivity benefits of investing in Latin America.

For more information about the benefits of forestry investment email COO/Senior Adviser, Michael Ackerman: m.ackerman@ecobosques.com .

Notes for editors

The 6th Timberland Investment World Summit was held on October 26-28, 2009 at the Millennium Broadway Hotel, New York, NY. The three day event featured more than 40 speakers and was attended by key decision makers from throughout the timber investments value chain, including pension funds, hedge funds, endowments, family offices, TIMOs, REITs, forestry management companies, paper and forest products companies, law firms and banks.

EcoForests is a boutique forestry investment manager headquartered in Spain and Canada, with offices in four European countries and FSC certified plantations in Costa Rica and Argentina.

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