Alternative assets manager Westbury Capital Partners is launching a timber fund, the Trilogy Green Forest fund, to offer investors access to forestry real estate, initially, in the south-eastern region of the  US.Westbury has joined forces with Trilogy Green Forest Partners, the US timber fund managers, for this venture. The latter will professionally manage the land and forestry assets.

"Opportunities to diversify away from traditional sources of return are at a premium at this point and the Trilogy Green Forest Fund offers a unique opportunity to not only contribute to a well balanced portfolio but also to help socially conscious investors meet their corporate responsibility ambitions whilst capitalising on assets that are hard to access," Westbury’s director, Simon Hookway, said in a statement.

The Cayman domiciled, open-ended fund, which will launch in January, has already committed assets of more than $200 million. It will be aimed primarily at institutional investors and private banks and has a pre-identified pipeline in excess of $1 billion. The fund will seek to generate annualised returns of at least 10 per cent.

The Trilogy Green Forest fund will not be leveraged at its launch nor will the managers seek to leverage the fund at any time during its life. This is a basic tenet of the managers of the fund.

Because of this investors will not find themselves in a secondary position due to deleveraging nor will they be subject to dilution through future capital raising to reduce debt, the firm said. 

Trilogy Green Forest manages and invests in timberland assets across the Southeast United States. Its activities include property identification, analysis and acquisition, maximising the returns of holdings and the disposal of appreciative higher value assets, as well as advising on the tactical allocation to timberland assets within client portfolios. 

Fund timberland assets have many sources of return: non-land based (timber growth, timber products, biomass, carbon sequestration, environmental conservation), land based (higher and better use land, recreation, alternative energy sites, environmental conservation) and underground (natural resources and carbon sequestration).

But at all times the key portfolio management driver will be sustainability to ensure that investment return generation is balanced with environmental considerations and hence sustainable development of the timberland so as to maximise long term investor benefits.

“Strategically, the south-eastern US is North America's "wood basket", and because of our climate and infrastructure, the south-east as a sun belt is a magnet for population migration and growth.  We foresee an expanding recreational land-buyer market and our principles excel in the procurement of timbered land in-the-path-of-growth," said John Barnett, Trilogy Green’s chief executive, in a statement.

Timber holdings are the quintessential asset for meeting an investor's environmental, sustainability and governance objectives, according to Trilogy Green Forest.

Going forward, the company predicts that forests will be increasingly priced as premium suppliers of alternative energy, conservation habitats and carbon sequestration resources. 

The biological growth of trees is independent of the state of the economy, Trilogy Green Forest points out. Timberland returns are largely uncorrelated with traditional assets and other alternative asset class returns and hence offer investors both a powerful long term portfolio diversification tool and inflation hedge.

Whilst most competitor dedicated timber funds are either closed or do not offer direct access to timberland, the company says it will offer investors a liquid, open-ended investment vehicle with annual redemptions and subscriptions subject to one year's notice period.  Intended fees will be 2 per cent management and 20 per cent performance after hurdle. 

The new fund adds to a number of portfolios that already exist, such as the London-listed Phaunos Fund, or the AIM-listed Cambium Global Timber Fund, or funds operated by forestry specialist investment firm Fountains.

Prices have risen strongly on the back of demand for products from emerging countries such as China. In the 12 months to March this year, UK timber prices rose by 46.3 per cent, according to Investment Property Databank, the UK real estate research firm. Returns on investment in forestry rose 31.6 per cent in 2007 from a year before, says IPD in its latest report on the sector.