A leading forestry investment fund has put its faith in the strength of the UK timber market by launching a new £20m fund-raising.

FIM Services Ltd’s Sustainable Timber & Energy LP aims to diversify its investment in commercial, sustainable UK forests and renewable energy projects in the fund-raising between now and December.

The fund, launched in 2010 and which is currently worth £43.6m, has more than 50,000ha under ownership, mainly Sikta spruce.

“The UK timber market is not a big market in a global context,” said FIM’s Robert Daniell. “We see the primary driver of timber prices globally in the emerging markets, particularly China.”

He said China’s consumption of timber in the next two or three years was expected to be about the level of last year’s entire Canadian harvest.

This increased demand, he added, would have a beneficial effect on the value of UK forestry and timber.

He said over the past 10 years, timber had outperformed equities, gilts and commercial property, and this was at a time of low timber prices.

“At a time when timber prices are quite low historically, the upside is really quite substantial.”

He said another factor beneficial of investment in trees was the continual biological growth of the timber and the current low value of forestry land.

Mr Daniell said more diversification in forest management and ownership was a good thing and was more healthy than in the past when the Forestry Commission was the supplier of last resort.

He did not think wider forest ownership, including by investment companies, created any concerns for the UK timber industry, and likened it to similar ownership in other commodities.

Currently, about 60% of UK conifer forests are privately-owned, of which FIM’s 52,000ha accounts for 4%. Harvesting on FIM’s land represents about 500,000 tonnes, or about 6% of land.

Mr Daniell praised the sophistication of the forestry/timber sector and said many people did not appreciate how advanced it had become.

The fund, whose core portfolio will remain commercial forestry, has generated returns in the last 12 months in excess of the target return of 6% for forestry assets in line with the long-term performance of the benchmark IPD Index.