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The Outlook for Private Equity Timber Fundraising – November 2012

The past 12 months have been a challenging period of fundraising for private equity vehicles investing in timber. Data from Preqin’s Funds in Market database, which tracks fundraising globally, documents the volatility in the market since the economic crisis. Timber fundraising reached a peak in 2008, with five vehicles reaching a final close, having raised $2.9bn in commitments. Comparatively, in 2009 five private equity vehicles closed, but only raised an aggregate $562mn in capital commitments. Timber fundraising returned to relatively healthy levels in 2010, with six vehicles closing having raised an aggregate of $1.7bn; however in 2011 fundraising decreased slightly, with five vehicles reaching a final close, having raised an aggregate $1.1bn in investor capital commitments. So far in 2012, only three funds have closed, having raised an aggregate $483mn for investment.

Despite these challenging fundraising conditions, investor interest in timber funds continues to increase. Out of the over 4,500 LPs on Preqin’s Investor Intelligence database which actively invest in the private equity asset class, 215 of these express an interest in timber investments.. The number of LPs expressing an interest in timber investments has increased from 3.9% at the end of Q1 2012 to 4.7% of LPs currently tracked by Preqin as of November 2012.

For investors seeking opportunities within timber as part of their private equity portfolio, Preqin Investor Network currently tracks all investment opportunities globally. There are currently six private equity timber funds in market seeking aggregate capital commitments of $1.6bn. The largest of these is Brookfield Asset Management Timberlands Fund V, which reached a first close of $120mn earlier this year, but is still seeking capital to reach its target size of $750mn. The vehicle seeks timber investments within Australia, Brazil, Canada, Chile, New Zealand, Uruguay and the US. As investors create separate target allocations to timber funds, the strategy may see a resurgence in the future to the previous levels of fundraising.

Posted by John Mather on 09-Nov-2012

Keywords: private equity, timber, fundraising