September 30, 2024

By Gerelyn Terzo, Global AgInvesting Media

Domain Timber Advisors, a subsidiary of Atlanta-based investment management firm Domain Capital Group, has scored a new mandate for forestland assets. London-based Fulcrum Asset Management has chosen Domain Timber to oversee sustainable natural capital investments on its behalf as part of its recently launched illiquid assets strategy that is designed to appeal to U.K. pensioners. Domain oversees $7.9 billion in total assets across Domain Timber Advisors, which boasts approximately $745 million in AUM as of Q2 2024, and fellow RIA Domain Capital Advisors.

In a deal that marks a new relationship between the firms, Domain Timber is serving as a manager of the investments. While the primary focus of forestland acquisitions will be in the U.S. South, Domain Timber Advisors will also consider opportunities across all timber-producing regions and expects to make its first investments in the coming months. The real assets manager told GAI News it is seeing a significant amount of interest from the U.K. and EU but also U.S. investors, as well, adding:

“We have found that demand for the forestry/timberland asset class is elevated compared to years past and continues to increase. We attribute this to the asset class’s potential to generate economic returns while meeting a variety of sustainability goals. Many of our clients have a desire to see the sustainable production of raw materials (wood products) in conjunction with the conservation and enhancement of biodiversity, protection of water quality and contributing to rural economies.”

Fulcrum has been fortifying its capabilities in illiquid investments of late ever since regulators loosened the guardrails for defined contribution pension scheme allocations to private asset investments. In addition to its latest partnership with Domain Timber, the British firm has been building on a series of investments by a panel of private market managers across segments including private equity, venture capital, natural resources, real estate, infrastructure and private credit.

Forestry demand is on the rise, as evidenced by U.K. pension giant Nest recently doubling its potential private assets allocation to 30 percent of its portfolio, including as much as GBP 600 million in global timberland assets with a targeted return of between 6 percent and 10 percent, according to a Reuters report. In September 2023, Domain closed the Domain Timber Advisors fund with $225 million in capital commitments. However, Fulcrum’s investment is not part of that fund.

As of 2022, the asset management industry offered just over 100 closed funds specializing in forestry and timberland, up from just a handful in 2003, according to Pitchbook data. With an average IRR in the double-digit percentage range, reaching a median 16.4 percent in 2021, forestry funds have proven their resilience throughout changing market cycles, earning the “emerging star of alternative investments” title by EY as a result.

Domain Timber Advisors Managing Director and CEO of Natural Resources Joe Sanderson said, “Over the past two years, our teams have worked diligently to craft a unique investment platform focused on acquiring and managing U.S. forestland assets within an evergreen investment structure. This approach allows us to enhance biodiversity and other ecological qualities of forestland while delivering long-term financial success.”

The new collaboration is structured to reach both financing and ESG-related goals by making strategic investments in U.S. forestland with a focus on properties that meet the sustainability standards defined by the Forest Stewardship Council (FSC) certification program. FSC is a non-profit organization with over 160 million hectares (395.4 million acres) of forestland certified by its standards.

Fulcrum Alternative Solutions Head Matt Roberts stated, “This represents an exciting new strategy for our private markets offering. Domain’s focus on sustainability and smaller lot size deals are very appealing facets of the mandate. Fulcrum Alternative Solutions identifies excellent private market specialists and works to make them accessible for U.K. defined contribution pension plans and other institutions. We believe managers like Domain offer both a compelling return opportunity and can help contribute to biodiversity improvement through, for example, reintroducing native species and improving certification standards.”

Domain sees a robust pipeline of available assets for investment and is always looking to develop new relationships. For more on Domain Timber, check out GAI News’ “15 Minutes With” feature story here.

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