Investing in forests as opposed to directly owning forestry land has recently gained popularity in Finland due to the emergence of indirect investment vehicles and the ease of investing.
The number of Jointly Owned Forests (yhteismetsät) has more than tripled since 2010. This trend is largely explained by the favourable tax schemes and other incentives the Jointly Owned Forests benefit from. At the end of 2022 there were a total of 600 Jointly Owned Forests in Finland, which typically hold thousands or tens of thousands of hectares land across Finland. Over 200 000 hectares of forestry land have been added to the Jointly Owned Forests since 2010, representing a historic and significantly large wealth transfer from private forest owners into indirect investments vehicles. Today Jointly Owned Forests represent 734 0001 hectares or 3% of the forestry land in Finland.
Apart from Jointly Owned Forests, a non-professional investor can access forest investments through forest funds. In Finland namely United Bankers, Osuuspankki, S-Pankki, Taaleri, and EVLI market such property and alternative investment funds. These funds, together with Dasos holdings, own 2% of the Finnish forestry land. A significant portion of the forest funds’ holdings have been acquired through the spin-offs in which publicly listed industrials have sold their forestry land holdings.
Dasos operates only to a very limited extent in the same equity- and forest markets as Jointly Owned Forests and other forest funds. Firstly, majority of Dasos’ Finnish holdings have been acquired through the aforementioned spin-offs and therefore Dasos does not focus on acquiring properties from private landowners. Secondly, Dasos invests across the European Union to diversify its holdings and has a lower target weight for Finland than its peers (EVLI’s fund of funds invests outside of Finland through foreign forest funds). Thirdly, Dasos funds are not real estate funds, but private equity funds while 95% of Dasos’ clients are institutional investors.
The forest investment market is growing and there is no sign of deceleration in this trend. Recently some 20 000 hectares of forestry land are transferred annually from private landowners to Jointly Owned Forests. If Jointly Owned Forests can continue to be competitive in the future and attract new capital, they can keep on acquiring properties, although the increase of interest rates may slowdown the process. Some 30 to 40 Jointly Owned Forests are founded annually, which is a significantly larger figure than the existing forest funds.
Dasos will continue to differentiate itself from the competition through maintaining and growing an internationally diversified portfolio while focusing on providing investment advisory services to the institutional clients.
1 National Land Survey of Finland, 2021.