Gresham House raises $500 million for its biggest ever forests fund

By Simon Jessop

LONDON (Reuters) -Alternative asset investor Gresham House has raised $500 million for its biggest ever forestry fund, with backing from investors including several British local government pension schemes, an executive told Reuters.

Investing in timber has become increasingly popular with asset owners looking for returns uncorrelated with the broader financial markets, and which also help them hit their environmental goals.

The final close for Forest Fund VI, which will target returns of around 8%, will see 375 million pounds ($508 million) invested in planting new and existing forests across the country, said Olly Hughes, who heads the forestry team.

"It's the largest fundraise in a single fund that we've raised and a signal of the interest and the momentum that's building around the sector as a whole."

Historically, most investment demand has been seen in the United States, with the fragmented mainland Europe and British markets more difficult to invest in at scale, he said.

The fundraising was backed by London CIV, which invests for a number of local government pension schemes in the capital, member schemes in the Wales Pension Partnership and an unidentified Japanese investor.

It also follows the recent signing of the Mansion House Accord, where some of Britain's largest workplace pensions providers signalled a willingness to increase their allocation to private markets in the country.

"This (fundraising) ... has enabled a number of larger-scale UK and international institutional investors to access the market for the first time," and would also help the country achieve its broader sustainability goals, Hughes said.

With Britain importing 80% of its timber and wood fibre, the fund would help bolster rural economic growth and the timber used in local construction and other industries in a more environmentally-friendly way, he added.

The fund aims to lock away 4.7 million tons of climate-damaging carbon dioxide over the next 25 years, and could potentially generate carbon credits which could be sold to add to its returns.

"Forestry offers the compelling combination of uncorrelated financial returns and measurable environmental benefits – from boosting biodiversity to contributing meaningfully to carbon sequestration," said Elwyn Williams, Chair of the Joint Governance Committee for the Wales Pension Partnership, in a statement.

($1 = 0.7409 pounds)

(Editing by Mark Potter)