Specialist asset manager Gresham House said it will acquire a portfolio of five forests in the west of Scotland for £12.1 million as it announced the first close of the Gresham House Forestry Fund LP with £15 million of commitments and finance raised.

It said the funds have been raised from university college endowment funds, family offices and private individuals, including £1.25 million from Gresham House.

Richard Davidson will manage the fund with support from the Gresham House dedicated forestry team and will target net returns of 10% per annum, which includes an expected annual income distribution of 2% to 4% from timber sales. 

Gresham House is targeting a final close for the fund in the second half of 2017 at a size of £50 million.

“The fund‘s limited partnership structure enables UK investors to benefit from the significant incentives associated with direct ownership of UK commercial forests,” said Gresham House.

Rupert Robinson, managing director of Gresham House Asset Management, said: “We are pleased to launch the fund and encouraged by the increasing level of interest from investors. 

“Forestry as an alternative asset class is growing in popularity amongst institutional and private investors.

“As investors increase allocations to real assets, timber is being recognised for its compelling investment credentials: it is a physical asset that generates income, gives inflation protection, is lowly correlated to equities and bonds, and importantly, trees grow irrespective of whether financial markets are rising or falling. 

“Launching the fund is in line with our strategy to grow assets under management organically. 

“It provides investors with access to a ‘green’ investment that has significantly outperformed equities, bonds and real estate over the last ten years and enables private individuals to pass on wealth from one generation to another free of inheritance tax.”