Ethical Forestry

You are thinking about investing your pension with a company Avacade that has only existed since 2010, lists no one by name on their website and is not registered with the FSA. One of the products they offer are 'Life settlement funds' which the FSA is banning as “high-risk, toxic”.

With a little research I found the director's name ( http://uk.linkedin.com/in/leelummis ) and he isn't registered with the FSA either. He is linked with CREDIT CLEAR UK LTD (claims to be able to break your credit contracts and consolidate debts) and BUY AND LET PROPERTIES LIMITED (now out of business). He is in his late 20's.

So this young man wants you to put your pension into trees in Costa Rica? How do know that he or the tree company is honest?

Short answer - don't touch it or any investment (timber, land, real estate, carbon credits, investing in films etc) promoted directly to you by firms in this way. These kinds of investments are barely regulated or completely unregulated, with no real restrictions on what firms can say when they are trying to persuade you to invest. You will not have any protection from the Financial Services Authority or the Financial Services Compensation scheme if things go wrong or turn out to be fraudulent, because these investments are not covered.


Longer answer about timber - it's an interesting asset in many ways, but assuming the websites I found with those names are the same companies who contacted you, they are being very optimistic with the returns they are promising. Timber returns have been pretty good in the last few years and are roughly consistently with the implied rate of return they are implying - but those last few years have been exceptionally good (and although not exactly mainstream, timber investing has certainly become more popular in this time).

Longer term, average returns have been much lower - recent high returns need to be contrasted with negative returns at the start of the decade (see the IPD UK Forestry index).

(The timber investments marketed by these firms are not UK timber but in Costa Rica seemingly - some different dynamics and risks will apply - I'm using UK statistics just to make the point that this is not a high return guaranteed every year asset class.)

Both sites quote - among other people - Jeremy Grantham of GMO on the merits of investing in timber. Grantham has long been very keen on timber - but his assumed long-term real rate of return on timber investments is 6% per year. The Ethical Forestry site projections work out to an assumed rate of return of about 16% per year. The difference should make anyone question how realistic these promises are, especially since 16% would be a staggeringly high rate of return to sustain over 12 years for something that is marketed as "secure".

(Obviously, the fact this is not regulated, the lack of names behind it, the difficulty of verifying what they actually do etc are the very first reasons you should steer well clear - but for anyone wondering if the underlying investment story stacks up, the answer is no.)

Have looked at this as i was passed the company details by Avocade, I was keen to give it a go as the returns were superb, too good perhaps, then I read the comments on here and have grave doubts about sending my hard earned money to someone i have never met, that says they will plant some saplings on my behalf in Costa Rica, then four years in will send me £5640, then four years later £15,595 two years later £20,518 and then two years later at harvest £62,436

How can you trust that will happen, even if the trees have not been eaten by beatles, blown away with a hurricane, or demand has declined?

I found this article very interesting at Money Observer
www.moneyobserver.com/issue/features/growing-pains

I for one am glad that I checked this Investment out, and is not something I will get involved in