The Church Commissioners for England, the management arm of the Church of England’s £6 billion endowment ($9.4 million; €7.6 million), has acquired a £49 million forestry portfolio from UPM Tilhill, the forestry and harvesting company.
The investment takes the endowment’s global allocation to timber above the 4 percent target set in 2010. It has built a global timber portfolio since then using six external managers across Australia, the US and the UK.
It has a direct portfolio in Scotland, two separate accounts and two pooled funds offering exposure to timber across the US, and two joint ventures including one in Australia with Indian sandalwood plantation owner and manager TFS Corp according to Joseph Cannon, the chief surveyor at the Church Commissioners.
It completed the TFS deal earlier this month, buying two plantations in the Northern Territory for A$20 million ($16.4 million; €13.3 million).
The sandalwood investment “sits at the more opportunistic end of our risk-return profile”, said Cannon.
“These are longer term investments with no income for 15 years, whereupon the total crop may be harvested and then distilled into oil to sell into the perfume and pharmaceutical sectors. There is also an active demand for the heartwood – the core of the tree – for sale in India and China,” he added.
The church will now take a “highly-selective” approach to making new timber allocations, according to Cannon.
“Our approach overall has been to target high single digit returns acknowledging the portfolio benefits that forestry brings,” he told Agri Investor in a statement. “We have directly targeted only developed world markets, and we prefer to access emerging market growth opportunities through our investments in the US Pacific North West and Australia via the export markets.”