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Why Invest In Forestry?

Sponsored by Forest Enterprises

28 October 2021

Forestry can bring diversification to your portfolio – it’s a long-term investment in a sustainable real asset with a successful export market.

Forest Enterprises, a leading forestry investment manager, enables investors to play a part in growing New Zealand’s strong forestry economy, by offering direct investment in pine forests – with ownership in both the land and the trees.

Why Forest Enterprises?

A Forest Enterprises investment is a direct investment in land and trees for one rotation of the forest crop (approximately 26 years). The kiwi company has a 46-year track record of helping more than 6,600-plus individual investors grow their wealth through forestry. Forest Enterprises has 20,000-plus hectares under management in the North Island and around NZ$400 million of assets under management.

How to invest

To invest in a forest through Forest Enterprises, an investor pays an initial amount up front and makes modest annual contributions (with tax deductibility) over 20 years until harvest. The minimum initial investment is set at an affordable level for retail investors.

An investor purchases shares in a forest-owning Limited Partnership, and they become part-owner of the forest with other investors. Forest Enterprises, as the professional manager, runs the business of the investment.

Why NZ is good at producing pine

New Zealand’s latitude and climate are ideal for growing Radiata pine, says chief executive Bert Hughes.

Radiata is the fastest growing and lowest cost exotic species to grow; it is the most versatile and, most importantly, the least disease-affected, he says.

It also has a huge capacity to sequester atmospheric carbon over each commercial rotation.

It's a strong export earner

Forestry’s a strong export earner – with demand for New Zealand’s logs currently at a high.

Managed Investments Director Graeme Tindall says that New Zealand logs are currently fetching historically high prices overseas. China, Korea, India, Australia and the US are New Zealand’s main markets.

“The returns over the last 10 years … they’re at the peak at the moment,” Tindall says.

Managing the risks

No investment is without its risks. In forestry investment, risks can include risk to the crop – for example a fire, or pests or disease. The price of logs can also go up or down, meaning returns fluctuate depending on demand overseas. However, time in the market is a positive. There’s extensive insurance over Forest Enterprises’ managed forests, and a team of experts work hard to help mitigate any risks. If you’re considering investment in forestry, a financial adviser can help work out if it’s best for you.

Fast facts on forestry

· Forestry exports are our third largest export earner, behind dairy and meat.

· The plantation forestry and logging sector directly accounts for 0.6 per cent of GDP or NZ$1.39 billion, plus a further NZ$2.16 billion in downstream activity.

· New Zealand forestry exports are NZ$4.8 billion. Australia and China are the main destinations.

· 9,500 full time employees are employed in the forestry sector, plus 2,000 truck drivers and 900 port services workers.

· Forestry production has risen from 10 million cubic metres in 1989 to 28.7 million cubic metres in 2016.

For more information and a copy of their latest Product Disclosure Statement, contact Forest Enterprises.

First published 8 February, 2019

Forest Enterprises is the business name of Forest Enterprises Growth Limited and its subsidiary Forest Enterprises Limited. Forest Enterprises Limited is licensed under the Financial Markets Conduct Act 2013 to manage Managed Investment Schemes (excluding managed funds) which are primarily invested in forestry assets.

This article does not contain any financial advice and has not taken into account any particular person’s circumstances. Before relying on it, we recommend you speak with a financial adviser. This story reflects the views of the contributor only. Content comes from sources that we consider are accurate, but we do not guarantee that the content is accurate.

Informed Investor's content comes from sources that Informed Investor magazine considers accurate, but we do not guarantee its accuracy. Charts in Informed Investor are visually indicative, not exact. The content of Informed Investor is intended as general information only, and you use it at your own risk.


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