Gresham House has raised £50mn from South Yorkshire Pensions Authority for Gresham House Forest Fund VI LP, an asset-backed forestry fund that aims to deliver robust, diversified returns for investors while contributing to lowering emissions and supporting biodiversity.
Gresham House Forest Fund VI LP was launched in March 2022 and provides investors with a diversified portfolio of forestry assets around the UK. Targeting a net IRR of 8%, it generates returns through the harvesting and sale of sustainable timber – which is increasingly being used as a lower-carbon alternative to traditional building materials – alongside the capital growth of the underlying land.
Over and above the target core financial forestry returns, the fund is expected to sequester 4.7mn tCO2e over the next 25 years, and investors in the fund also have the opportunity to receive distributions in the form of carbon credits, which can be sold to provide an additional return or retained for carbon insetting purposes. The estimated accumulated certified carbon credits, based on a £400mn fund size, could be up to 1mn credits over 25 years, subject to the level of new planting land acquired into the portfolio.
The commitment from South Yorkshire Pensions Authority builds on existing backing for the strategy from Worcestershire Pension Fund and high-net-worth individuals and brings the fund to over £150mn in size.
Further closes are also planned for the strategy, with institutional investors increasingly recognising the ability of forestry investments to provide compelling financial returns while delivering a positive impact in terms of emissions, biodiversity and job creation in rural communities. Gresham House is the UK’s largest forestry manager and a top 10 natural capital manager globally, with £3.5bn in forestry assets under management.
The commitment from South Yorkshire Pensions Authority follows a busy period of inflows across Gresham House’s real assets strategies, with its ReSI LP shared ownership housing fund recently securing £125mn from Gloucestershire Pension Fund and Devon Pension Fund.
Olly Hughes, managing director, forestry at Gresham House, said:
“We continue to see strong appetite from institutional investors for forestry investments, and it is testament to Gresham House’s expertise in this area that South Yorkshire Pension Authority has chosen to make this significant commitment to Forest Fund VI. As global timber demand continues to rise, we anticipate interest in our forestry strategies will remain strong for the foreseeable future and we look forward to welcoming further investors in due course.”
George Graham, director, South Yorkshire Pensions Authority, said:
“Forestry has an important role to play in our portfolio as we build out our natural capital allocation. Importantly, it offers a resilient, diversified source of returns while supporting our net zero journey and efforts to combat climate change and support biodiversity. Gresham House’s experience and track record in managing forestry assets makes this strategy a natural choice for South Yorkshire Pensions Authority.”
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