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Jean-Sébastien Debusschere : « The philosophy of the fund is to purchase and operate the forests around the world. »

Jean-Sebastien Debusschere, CIO of Fourwinds Capital Management explains the strategy of its fund focused on an original approach: forest investment.

Article also available in : English EN | français FR

Can you tell us more about Fourwinds Capital Management?

Fourwinds Capital Management is an independent management company, specialized in natural resources and commodities, with a strong team of over 50 people across offices in Geneva, Boston, London and Hong Kong. The assets under management now amount to about $ 1.5 billion, divided in three areas of investment. The first pillar is dedicated to the management of "total return" hedge fund invested in the commodity markets (Zephyr Fund - Ceres Agriculture Fund). The second pillar deals with the market of water treatment and waste management (Waste Resource Fund - Aqua Resources Fund). The third pillar is devoted to forest investments, through the "Phaunos Timber Fund" on which we shall later provide more details.

What is the investment philosophy of the « Phaunos Timber Fund »?

The philosophy of the Phaunos Timber Fund, listed on the LSE, is to purchase and operate of forests worldwide. Our portfolio of forest assets has been designed to be diversified, in accordance with an investment process and rigorous selection, validated by an internal investment committee and our board of directors. The operation of our forests is outsourced to specialized companies according to the need of a socially responsible management.
The objective of this fund is to deliver a performance of around 8-12% per year net of taxes and management fees while maintaining a low annual volatility of around 6-8%.

What are your main forest assets today?

Our portfolio currently holds about ten forest assets, corresponding to a total commitment of over 700 million. In terms of amounts involved, our main investments were made in South America (Brazil and Uruguay), Eastern Europe (Romania) and China.

What are the main advantages of forest investment?

The first advantage is the valuation over time of forest investments through the biological growth of trees. Indeed, the value of forests increases with age, making this growth all the more so interesting since it is independent of the global macroeconomic situation.
Second, investments in timber have historically generated higher performances than other asset classes. The "NCREIF Timberland Index," published in 1987 by the "National Council of Real Estate Investment Fiduciaries, which is the benchmark for this asset class has generated over the past 20 years a yield to maturity greater than the MSCI World or to the S&P GSCI - commodity index - for example. It is important to note that this performance was achieved with low volatility levels, allowing to offer an attractive risk /reward profile.
The last but not least advantage for an investor is the low historical correlation of the forest investments with other asset classes, as shown by studying the NCREIF index values ??since 1987. This decorrelation is also easy to understand due to the biological aspect of this investment, mentioned above.

According to you, what will be the position of forest investment in the current context of environmental protection

The Forest Investment will exhibit a strong demand driven by population and economic growth while the forest areas will become more and more rare on the planet. Moreover, the environmental value of forests will probably be subject to carbon credits in a relatively near future. Wood, a renewable energy source can be considered as a sustainable strategic resource. Beyond the obvious advantages (biological growth, yield and decorrelation), the forest investment should, therefore, make out alright in the coming years given the current context of environmental protection. In fact, Calpers, the California pension fund did not make a mistake by investing 1% of its assets under management in this asset class in 2008!

Next Finance January 2010

Article also available in : English EN | français FR



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