Investors keen on the idea of an asset class that takes years to mature, pays a regular income and can be based in a wide, geographically dispersed area should take a look at one of the Earth’s most familiar materials – trees.

While the Morgan Stanley Capital International index of developed countries’ stock markets fell by about 40 per cent last year and hedge funds on average also lost money, timber delivered a positive return.

The National Commercial Realtors Investment Fiduciary – T Index showed that returns in 2008 for timber were 9.45 per cent, a return that, while not of the spectacular level that once dazzled dotcom investors in the 1990s, is a respectable, solid result that is attracting interest, Trilogy-GFF Partners, a US forestry investment and advisory company, told WealthBriefing recently.

“Since 1987, the aggregate forestry businesses in the US will have generated a return of 15 per cent per annum,” John Barnett, Trilogy’s chief executive, said in an interview during a business trip to London. “The other real driver for people is that forestry is inversely correlated to just about anything else in your portfolio, including real estate,” he said.

Trilogy is asset manager to a swathe of forestry land across the US south-east region, covering states such as Alabama, Kentucky, Tennessee and the Carolinas. Trilogy GFF Partners acts as day-to-day manager of the assets in a long-only fund, launched earlier this year, called the Trilogy Green Forest Fund, a Cayman Islands vehicle that is managed by Westbury Capital Partners, also registered in the Caymans. Withdrawals and subscriptions to the fund are overseen by MSS, a UK firm. MSS was formerly known as Westbury Asset Management, which was set up in 2001.

“We are looking to get commitments from seed investors [to the fund] by the end of June,” Caelim Parkes, of Westbury Capital Partners, told WealthBriefing at the same interview. The fund will invest in US limited liability companies holding forestry assets.

The fund has a capacity to raise as much as $850 million in three to five years time, Mr Parkes said.

“There is a lot of wood around the world but not all of it is harvestable with good returns. The reason we looked at the US as a starting point is that the woodland has pine with a 25-year maturity, and grows by 6 to 8 per cent a year,” Mr Parkes said.

There are few problems with uncertainties over property rights in the US – a problem that can occur in other heavily forested countries, Mr Parkes said.

Forestry in the UK and some other countries has historically been a tax-efficient investment, he said, noting that governments have frequently sought to encourage tree planting with fiscal incentives. The US tax position has needed some careful thought and the structure which has been put in place to own the land has been done in a tax efficient manner.

Returns on forestry have been strong; in 2007, for example, the Investment Property Databank index on UK forestry returns showed a three-year total return of 22 per cent; new data is due out from the UK research organisation later in June.

The Trilogy fund is for high net worth individuals: the fund could be open to investors with as little as $1 million, and be available in dollar share classes. It will come with annual liquidity with a one-year notice period on redemptions.

Trilogy’s Mr Barnett said there are risks that investors should be aware of, such as fires, storms, floods and pests. However, the sheer diversity and scale of forestry means diversification of assets is a good guard against this, said Mr Barnett.