IPD UK Forestry Index

Forestry investment best asset class in 2007

Who said money doesn't grow on trees? Investors in British forestry funds last year saw far higher returns than from other traditional classes of assets. New figures show the IPD UK Forestry Index returned31.6 per centin 2007, six times higher than equities (5.3%) and five times higher than bonds (6.4%) and at the other end of the spectrum to commercial property, languishing at -3.4%.

Never before in the history of the index has forestry returned a level higher than all of the other main asset classes.

A rise in demand for timber combined with steadily increasing prices helped propel forestry to its top place in investment classes. Although there has been a recent slowdown in the price increases, experts advise that there is ample room for continued growth. According to James Hepburne Scott, of the Confederation of Forest Industries (CFI), there are firm grounds to believe that there will soon be a worldwide shortage of sustainably produced timber.

Timber is steadily replacing fossil fuels as a sustainable energy source in industry. Even though in many parts of the world the credit crunch has slowed the pace of new construction, timber is being often being chosen over other materials as the more environmentally friendly option.

Demand for timber is expected to remain strong as the fundamentals mark it out as being distinct in that it is renewable, sustainable and is not closely aligned with financial markets. On the other hand, it is linked with commodity markets and prices of raw sustainable materials are forecast to enjoy continued growth in the medium term.

Note: IPD (Investment Property Databank) is the the world leader in performance analysis for the owners, investors, managers and occupiers of real estate.