The VBI Timberland fund is structured as a 15-year closed-end fund and hopes to raise $350 million to invest in sustainable plantation forestry – mostly eucalyptus – in Brazil. The fund managers say there is growing appetite for such investments from major US pension funds and endowments, who see forestry investments as a way to diversify their portfolios and provide a hedge against inflation while generating healthy returns.
The fund is targeting a 14% annual internal rate of return, net of local taxes and management fees. All of its projects will be certified by either the Forest Stewardship Council or the Programme for the Endorsement of Forest Certification. First closing is expected in December this year.
Vision Brazil Investments, an alternative asset management company based in São Paolo, is acting as the investment manager, while Brazil Timber, a forest management company, will be the property manager.
Returns should be higher than from comparable global funds, the managers said, thanks to low land prices and high forestry productivity in Brazil. Most of the returns will come from capital appreciation of the timber assets, but there is additional potential upside from land-use change and environmental services such as carbon credits, they added.