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Aquila prepares for close, eyes LatAm – exclusive

Aquila Capital will hold a close on its forestry fund, Aquila Sachwert Basisfonds I, in the middle of the year, and is looking at satellite investments in Latin American countries like Uruguay.

Aquila Capital will hold what appears to be a second close for its Aquila Sachwert Basisfonds (SWBF) I in the second quarter of this year, and is looking to make satellite forestry investments in Latin America.

SWBF I’s LPs are German institutional investors. It invests in commercial timberland it considers socially important or sustainable in politically stable countries and established markets, according to timber investments portfolio manager Nils von Schmidt. Investments include a pine plantation in Australia’s Green Triangle, as well as mixed conifer forests in Finland and Scotland.

“We are currently building the core portfolio for the SWBF fund,” Aquila Capital timber investments portfolio manager von Schimdt told Agri Investor. “This means investments in Europe, Oceania and North America. Latin Amercia is the most likely destination for satellite investments to be added to the portfolio, featuring a different risk-return-profile.” The fund’s life is set for 2028.

Eighty to ninety percent of new forestry investments will soon take place in emerging markets in South and Central America, Africa and Asia, according to a white paper published at the end of last year by the agricultural and forestry investment firm.

Von Schmidt said institutional investors are also becoming increasingly comfortable with investing in emerging markets: “With the asset class and timber markets maturing and investors gaining more understanding of them, it will be increasingly possible for institutional investors to move into markets that aren’t as developed as traditional markets like the US, Western Europe, Oceania, Brazil, Chile or Uruguay.”

He expects wider interest in Latin America from institutional investors, particularly  in countries that follow in the footsteps of Uruguay.

“We know that other countries like Colombia, Paraguay, Ecuador and Peru are looking at what Uruguay did in timber, are trying to mimic that and use the lessons learned. If those countries are able to build a strong and stable regulatory environment, that would be a great step forward. There you have some of the best sites available on which to grow great investments [and] that is where we expect the most development.”

Latin American countries excluding Brazil, Uruguay and Chile had fewer than 600,000 acres of forest under management in 2015, according to forest product data provider RISI, while foreign investment in timber in Uruguay covered 600,000 acres.

He said that after that institutions would be interested in looking at Africa or Asia, but that restrictions to gaining land ownership in some countries could be an issue for some.

Aquila’s Investments in Timberland white paper adds that demand in Africa, Latin America and Asia is much higher than the rate of timber production in those regions, while investments tend to be made in areas with lower demand.  The report suggests the asset class needs greater geographical diversification.

Aquila Capital manages timberland assets of more ‎€83 million.