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FRA seeks support for new Brazilian forestry fund
A new Brazilian timber investment fund has attracted support from Forestry Research Associates (FRA), the research and analysis consultancy that concentrates on the forestry industry.
By: Peter Collins
The new VBI Timberland Fund intends to raise $350 million through the scheme, which it will then invest in sustainable forestry projects in Brazil. The fund is aiming to put most of the money towards plantations of eucalyptus, a timber that is popular in the manufacture of furniture and can also be used in the steel industry once turned into charcoal.
The fund is being structured over 15 years and has a closed-end structure. Peter Collins, an analyst at FRA, said, “The launch of this fund is great news for the forestry investment sector and is likely to prove popular among those looking for an investment opportunity that is both profitable and ethical.”
The annual internal rate of return being targeted is an impressive 14 per cent and the first closing is expected to be in December 2011. Mr Collins added “FRA welcomes the news that the projects invested in will all either be certified by the Programme for Endorsement of Forest Certification, or by the Forest Stewardship Council.”
The forestry projects will be managed by Brazil Timber and Vision Brazil Investment (VBI) will act as investment manager for the fund. VBI claims the returns should be higher than some funds operating in other countries thanks to a combination of low land prices and high forestry productivity in Brazil.
Greenwood Management is another firm operating a forestry investment opportunity in Brazil. However, Greenwood’s investors are given the chance to make a direct investment in the forested land itself. Their returns are based on the increase in the value of the timber as it grows.
Mr Collins concluded, “Brazil is a great centre of forestry investment due largely to the booming domestic market for charcoal used by the steel industry. Construction firms are busy preparing for the 2014 World Cup and the 2016 Olympics, while the government has all but banned the use of native trees in the production of charcoal in the steel industry."
“These combined make it a good time to be growing non-native trees in Brazil,” he added.
About Forestry Research Associates
Forestry Research Associates is a research and advisory consultancy that focuses on forestry management, sustainability issues and forestry investment around the globe.
Forestry Research Associates
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Bainbridge Island, WA 98110
(206) 316 8394