Asset manager Gresham House has appointed Olly Hughes as managing partner of its forestry division, to drive investments across Europe.
Hughes joined from investment manager Oxford Capital Partners, where he was head of infrastructure and grew infrastructure and real assets under management from £20 million ($25.6 million; €22.7 million) to over £300 million in five years. He was previously founder of renewable energy company Vigor Renewables and chief executive of an investment banking joint venture between Devonshire Capital and Kiatnakin Finance and Securities, Gresham House said.
Hughes will drive business strategy for the forestry sector, look at new product opportunities, support fundraising initiatives and be involved in client management, explained Rupert Robinson, managing director of Gresham House.
“Out of our £1 billion forestry assets under management, half is managed in limited partnerships and half is directly owned by family offices and private investors”, Robinson told Agri Investor. Gresham currently manages over 110,000 hectares of forests and is the UK’s largest commercial forestry manager, harvesting around 10 percent of the country’s total softwood annually.
“Last year, we raised about £70 million of which £35 million went into the FIM Sustainable Timber and Energy LP. This year, we hope to raise nearer £100 million including £40 million for the FIM Timberland Fund. We will aim to raise money for the Forestry Fund LP in 2020”, he stressed. All of the above-mentioned funds are evergreen.
Gresham House’s business is focused on the British forestry market, with 75 percent of forestry AUM in Scotland. “We will continue to invest in British forestry and also look to expand in other European countries. We bought a number of individual Irish properties last year, worth less than £10 million, but we will do a lot more in Ireland in the next few months. Our plans in other European markets are less advanced, but the priority is to look at other countries like Estonia, Slovenia, Lithuania, Romania later this year,” Robinson said.
“Until now, the attractiveness of the UK market outweighed looking elsewhere. Forestry in the UK outperformed all other traditional and alternative asset classes over the past 10 years, producing an annual compound return of 15.7 percent, as evidenced by the IPF Forestry Index, and we expect this positive trend to continue.” The UK IPD Forestry Index returned 13.9 percent in 2017, compared with 9.9 percent in 2016.
“UK timber prices soared too recently, partly as a result of Brexit. The fall in the value of pound sterling particularly against the Swedish Krona has made domestic producers more competitive and helps drive prices,” Robinson said.
The 30 percent increase in timber prices between March 2017 and March 2018, as estimated by the UK Forestry Commission’s Index, is also due to growing demand in traditional wood-using industries, such as sawmilling and board production, as well as in the biomass and renewable energy sector and housing, according to the 2018 UK Forest Market Report by John Clegg & Co.
Robinson pointed too to the green credentials of forestry attracting investment as well as the UK government’s move to incentivize forestry to help tackle climate change.
There has also been a rise in forest land values due to the shortage of forest coverage in Britain, he added. The John Clegg report estimates the average cost of a forest property to be £1.83 million, compared with £1.28 million in 2017, with the average size reaching 196 hectares.
Scotland retained its dominant position in the commercial forestry market place, with 69 percent of sales recorded there in 2018, the report states. Just over a quarter (26 percent) of sales were in England with the rest in Wales.