DENMARK - Lærernes Pension, the Danish teachers' pension fund, has announced it now has almost 7% of assets invested in forestry, or DKK2bn of its DKK30bn AUM. The investment may now make it the most significant European institutional investor in the asset class in terms of asset allocation, the fund said.

"We started right back in 2000 and today we have forestry investments around the globe, concentrated in the US, South America and Australia/New Zealand," said Lærernes managing director Paul Brüniche-Olsen.

The asset class has many advantages, according to the pension fund. It produces a stable, long-term return and it is good for the global climate. So far the asset has produced a stable annual return of around 10%, it said.

Denmark's pension funds have invested heavily in forestry over the last few years. Eight pension funds have put more than DKK8bn into the sector in the last few years, and expect to invest a further DKK8bn in the asset over the next two to three years, according to the newspaper Jyllandsposten.

Earlier this year, pension fund giant ATP announced that it planned to invest up to DKK3bn in forestry via its new unit ATP Timberland Invest. The first investment was the DKK180mn purchase of the forest of Upper Hudson Woodland in New York State, covering about 38,000 hectares (roughly 95,000 acres). (See earlier IPE article: ATP to invest over €400m in timber)

Lærernes Pension used Danish firm Copenhagen-based The International Woodland Company (IWC) as strategic advisers on forestry investment.

IWC's Managing Director Otto Reventlow said there were several advantages for pension funds and other long-term investors in buying into forestry as an asset class.

"The returns have been attractive at around 10%, and those returns have been fairly stable, unlike the returns seen for quoted stocks," he told IPE. "It also seems that there is no correlation with the main asset classes, for example quoted stocks and bonds.

"It's a long-term investment and that's something the institutional investor likes. Your cash flow is low but your value build up is high."

Even though the price of timber falls sometimes just like any other commodity, the advantage is that wood does not have to be harvested immediately, he said. It can be harvested gradually over the next 10 years, for example, he added.

Forestry is also a ‘climate investment', because of its carbon-neutral properties as fuel, and this makes it attractive to institutional investors too, Reventlow said.

Topics