FIM Services has raised £6 million ($10 million; €7 million) of a £25 million fundraise for its FIM Sustainable Timber and Energy Fund and is starting to get interest from small institutional investors, according to fund manager George Krempels.
The UK-based forestry and wind farm asset manager already handles direct individual portfolios for family offices that are also expressing an interest in the fundraising, but the fund usually attracts high net worth individuals.
“Due to the increased scale of the fund, we are now noticing more interest from small institutional investors such as family offices and pension funds,” said Krempels. “Some have invested in forestry before and others are new to it; it really varies.”
The limited partnership fund has already deployed £2 million from the new round of fundraising and will increase the hard cap if FIM finds enough deployment opportunities before the formal close in November. The firm invests across the UK, mostly into Scotland.
The 10-year fund is currently on £85 million after two rounds of fundraising since its inception in 2010. The average commitment is £150,000. The fund’s initial termination is set for between 2020 and 2021 although there will be the opportunity to roll over the investments for another term or few years, according to Krempels.
Shareholders can also sell their stakes through a private sale that FIM will help facilitate. One investor is currently selling 22 shares in FIM Forest Fund I, the 10-year pure forestry fund that launched in 2008 and is on £63 million.
FIM Sustainable Timber and Energy Fund invests 80 percent of its assets into forestry and 20 percent into wind farms. The wind farms produce the majority of a 3 percent annual distribution to shareholders, although some of the timber is harvested to contribute.
Fund I, which is purely forestry, produces the 3 percent distribution from harvesting only.
“We aim to harvest as little as possible because we believe that timber prices will significantly increase in the medium-to-long term,” said Krempels, “so it is better to leave the trees growing, adding volume and value”.
FIM Sustainable Timber and Energy Fund targets a 7 percent annual return although since inception it has returned closer to 15 percent, according to Krempels.
The firm charges a 2 percent participation fee, 2 percent on any capital deployed and a 0.5 percent a year management fee. When it comes to selling the assets, FIM charges 2 percent on the sale value.
FIM accounts for a large portion of the UK’s forestry investment market after being responsible for about £60 million of a £125 million – £150 million market last year, according to Krempels.
He added that FIM is in a strong position on the timber sales side because the UK can only produce around 30 percent of its total timber needs, so there is a wealth of demand for the end product.