Forest Enterprises says more investors looking to forestry sector after Covid-19.
One benefit of investing in forestry, says Bert Hughes, CEO and Forestry Director of Forest Enterprises, is that it is not affected by the short-term peaks and troughs of the economy. It’s much less prone to unexpected economic shocks that can shake the share market.
As investors re-evaluate their portfolios in the wake of the Covid-19 pandemic, they are turning to forestry for diversification and to reduce exposure to volatility in the financial markets, he says. Investors want to be part of an industry which delivers social and environmental benefits as well as good returns.
The latest investment, says Hughes, projects a gross return of about $129,000 for a contribution of around $25,000 – but you need to be in it for the long haul.
That’s the kind of equation that his company, offering forestry investments since 1972, deals in.
“Forestry is a primary industry, like farming, but it’s not intensive. Once the planting of radiata pine is done, the land is more or less left alone until harvesting occurs”, says Hughes.
“The trees just keep growing,” he says, “and it’s a good way to spread your investments over the long-term.”
Hughes is a member of the New Zealand Institute of Forestry, and a Chartered Member of the Institute of Directors. He says the regulator, Financial Markets Authority (FMA) delivered a welcome change in 2015 with its strict licensing and regulatory regime covering the whole financial investment sector. Forest Enterprises has a Managed Investments Scheme licence issued by the FMA to offer and manage forestry investments.
“Those licences are challenging to get – and to retain,” says Hughes. “Our scheme assets are held by a licensed supervisor, there are annual audits of forestry assets and our finances. I think it’s great for our industry that the FMA offers a real safeguard.”
Right now, Forest Enterprises is offering shares in its Pukekōwhai Forest Investment with a minimum initial investment of $8,472 for 200 shares, plus annual calls until harvest, taking the total projected gross contribution to $25,429.
The investment’s gross return at harvest time, between 2044 and 2051, is projected to be $129,732. That’s an estimated gross projected IRR of 7.68 per cent. Hughes says this offer is now over 85% sold or allocated.
“Investors shouldn’t have a fear of missing out”, says Hughes. “There is no scarcity, but there should be a sense that the sooner you get into a forestry investment, the sooner you can benefit.”
The company currently has around 6,500 individual investors and its associated forests are insured for over $400 million, says Hughes.
“Some people have $10,000 invested and others have significantly more than that,” he says. “Most of our investors are Kiwis, although there are some offshore shareholders.”
Hughes is proud that he’s offering investments in a sustainable product.
Hughes says Forest Enterprises is the country’s most successful forestry investment manager, delivering “financial and environmental returns – our forests are a renewable resource that is sustainably managed. Forestry is a responsible investment and essential if New Zealand is to meet its climate change goals.”
Hughes says Forest Enterprises typically planted on land that wasn’t making a suitable return for farmers: “There is a better return in forestry, and the land will only stay in productive use if people invest in it.”
“As a member of the Institute of Forestry, we follow a code of ethics including sustainability,” he says. “Land use must be sustainable. New Zealand is highly regulated for land use when compared to most other countries.”
Hughes says there are basically two types of investment – right at the start when seedlings are planted, like Pukekōwhai, or further down the track if an investor decides to sell their holdings before the forest is ready for felling.
“Some people sell on the secondary market when their circumstances change,” says Hughes. “We help by matching sellers with buyers.”
For a product disclosure statement, visit www.forestenterprises.co.nz. The issuer of shares in Pukekōwhai Forest Investment is the manager Forest Enterprises Limited, and the offeror is Forest Enterprises Growth Limited (a related party). Forest Enterprises Limited is licensed to manage Managed Investment Schemes (excluding managed funds) which are primarily invested in forestry assets.
Link to www.forestenterprises.co.nz/pukekowhai