On The Scent Of a Good Fund

Aug. 16, 2011 - PRLog -- It is in fact a fund that can leave you smelling of roses …well not quite, Oud or Agarwood to be precise.

There are many Forestry funds and Timber investment opportunities on the market today; they range from planting trees in Africa to buying woodlands in Scotland. The one thing they all have in common though is an underlying asset class which continues to grow regardless of the economic climate.

One such fund was recently launched by The Africasia Fund. It is unique in that it combines the king of timbers—Teak, well known for its high value and demand, from luxury yachts to bespoke garden furniture and even the inside of the latest Rolls Royce Phantom, with Agarwood, a little known timber which in fact has absolutely no timber value at all.

For centuries the mysterious Agarwood tree and more importantly the oil resin which it contains has been a main ingredient in perfumes in The Middle East and the Orient. More recently it has been discovered by celebrity designers from Tom Ford to Christian Dior and is today the “hot fashion” fragrance in most of the major companies’ line ups—including one of world’s largest selling fragrances Dior Fahrenheit. The demand for luxury goods globally and the impact of the emerging markets of China and India on the demand for this elusive oil is now so high that good quality oils are worth more than gold per troy ounce. It is referred to in the trade as “Black Oil” and demand is already far outweighing supply of legally grown stocks. The reason behind this is simple, Agarwood trees have been so highly prized for the oil they contain that across Asia they have been one of the root causes of deforestation; to such an extent that the tree was declared an endangered species and protected by CITES (International Convention on Trade in Endangered Species). Since 2000 it has been illegal to harvest a tree in the wild, although its estimated up to 90% of oils currently in the market still come from illegally harvested trees, as without a CITES permit they cannot be sold legally. The plantations invested in by the fund are sustainably managed and all products carry a CITES permit and the plantations own brand which guarantees to trace the source of all oils produced back to the trees it came from. Furthermore, they plant at least two new trees for every one harvested as well as investing in social projects within the communities they operate.

Unlike most forestry investments or funds which have a very long-term investment horizon, The Africasia Sustainable Forestry Fund has targeted existing standing timber plantations, providing an asset value from the outset.  By mixing Teak and Agarwood The Africasia Fund has also created the world’s first internally hedged forestry fund, providing returns from approximately 2 years and complete exit within 8 years.

Teak draws its commercial demand from the world of manufacturing and construction and is highly prized for its weather resistant qualities.  Agarwood derives its market from the luxury perfumes world and anybody who has been to Dubai will have sensed the soft aroma in the air from the daily burning of infected wood chips as it’s believed in Arab cultures to cleanse the body and mind, providing health and wellbeing and is an important part of everyday life. So, with two timber species uncorrelated by demand, hedging the risks within one fund sounds like a well thought-out investment strategy for someone seeking exposure to the sector.

The Fund is managed by Emerging Asset Management a wholly owned subsidiary of multi award winning Apex Funds, who are now one of the world’s fastest growing fund service providers with approaching $20 billion currently under administration. The fund is a Bermuda Institutional Fund, providing a regulated and safe haven for both onshore and offshore investors.

Investment Advisor to the fund is UK based Plantation Capital Plc. who have been specialising in the farming and forestry sector since 2008 and have a track record of delivering solid double-digit annual incomes to investors on some of their other projects since 2009.

John Massey, Market Analyst based in Singapore , of the Africasia Fund. “ We have been looking for some time to find the right combination of timber species and high quality existing timber stocks to offer a relatively short term fund with a combination of species to provide what often misses from longer term forestry investments—income and a short term exit strategy. We believe the combination of standing Teak and Agarwood managed by industry leading professionals is pretty solid and provides an interesting and unique risk hedge within the assets that the fund invests in”.

The initial plantations which are earmarked for the fund are in Thailand and Malaysia, two of Asia’s most stable economies, both recognised as indigenous and high quality locations for both Teak and Agarwood.

If you are interested in seeing your money grow on trees and are keen to take some of your investment strategy into the woods today, then take a look at the Africasia Forestry Fund…as forestry keeps on growing come what may. Only yesterday (10th August 2011) it was predicted by Leslie Grantham, the renowned market commentator that forestry alongside farming is one of the most secure investment strategies for the next 10 to 20 years, as it has been for the last century.