Why Invest in Teak
Our teak investments can produce an Internal Rate of Return (IRR) of 27% per annum. For example, from an investment of just £15,000 you stand to receive circa £500,000 over the lifetime of the investment.
Historically, forestry has offered low volatility and minimal correlation with equities. It’s perhaps not surprising then, that given the recent global economic downturn, a growing number of individuals, institutions and pension funds are including timber as a ‘hard asset’ in their portfolios.
And why not? The price of mature teak once harvested has averaged an annual increase of 6% over the past century, while stocks, bonds and commercial property have both seen returns tumble in recent years. That trend looks set to continue with the rising global demand for timber, fuelled in particular by the exponential growth in consumption of China and India. The UN Food and Agriculture Organisation isn’t in any doubt, predicting world consumption of industrial wood will rise 60% over the next 25 years.
For those looking for an investment that will allow you to pay off your mortgage in the next 20 years it would appear that timber is the natural choice.
* Four year old teak trees awaiting inter cropping with Gliricidia, Vanilla & Peppers which will promote quality teak production
Supply and Demand
As things stand, supply can’t keep up with the growing demand, which has multiplied by 25 times in the past 40 years. According to the United Nations, 13,000,000 hectares of rainforests are deforested each year and along with them, the world’s supply of tropical hardwoods.
Currently India and Indonesia hold the world’s largest natural teak reserves. However, mass deforestation led India to ban teak harvesting in 1982 and to also place strict restrictions on the felling of any natural timber; while Indonesia has imposed a total ban on teak exports, since it cannot meet its own domestic demand. Thailand, once a giant of the teak export market has now become a net importer of teak. Its natural reserves are considerably smaller than that of Indonesia and India since Thailand suffered prolific industrial deforestation in the 20th Century. Thailand has also banned natural teak felling and teak exports. India remains the second largest importer of Teak next to China.
With such restrictions in place by countries that, historically speaking, are the major market players, it is not difficult to see why demand outstrips supply. All of which bodes well for investors looking to diversify their portfolios whilst realising an exceptionally high return on investment.
Reduce your Carbon Footprint
For many the associated financial rewards are incentive enough, but forestry also provides the added attraction of being a sustainable and ethical investment choice. “…..as ‘green’ awareness rises around the world, timber is set to become even more attractive as an asset.” (The Economist)
Not only is timber one of few renewable raw materials used by industry, but trees can also help to tackle climate change. In fact, just one mature teak tree absorbs one whole metric tonne of CO2 from the atmosphere every single year.
Purchasing a forestry investment could make you and your household Carbon Neutral, something which could save you money in the future. Indeed, Denmark has already introduced a carbon tax on households and the rest of the EU looks set to follow.
By owning a forestry investment you can take great pride in the knowledge that you’ve personally helped to remove hundreds of metric tonnes of CO2 from the atmosphere.
With stellar returns, a growing demand and impeccable environmental credentials, it’s clear why so many smart investors are investing in timber and why it is fast becoming one of the most exciting and strongly desired next generation investment products.
