A conversation with Jeff Dickie at Roger Dickie Forestry

In this conversation, Co-CEO Mark Hurley sits down with Jeff Dickie, Managing Director at Roger Dickie, to delve into the strategic insights and operational excellence that drive the Awatea Fund and underscore Roger Dickie's leadership in forestry investments.

Jeff, Roger Dickie NZ has a long-standing reputation in the forestry industry. Can you share some insights into the company's evolution and what you believe are the key factors to its success and longevity in this sector?

RDNZ is a family-owned and operated forestry and Agri-investment business, established by Roger, and carried on by sons, Will and Jeff. As it is with most family-based companies, there is an additional intangible layer of responsibility and accountability. We take great pride in what we do and what it means for our family of investors.

Operations began in 1971, and since 1989, we have been making forestry investment a possibility for thousands of Kiwis through syndicated or private ownership models. Today, assets under management total $1.3 billion and with future growth aspirations. We see significant future opportunities based on fundamental wood consumption along with forestry’s contribution to carbon storage.

It is our goal to educate New Zealanders about those advantages and to make investing easy. As part of that journey, continuing to improve the investor experience is key, hence engaging Caruso for a purpose-built investor portal. Giving the investor a more informative experience.

What motivated the launch of the Awatea Fund, and how does it encapsulate Roger Dickie's commitment to advancing the forestry investment landscape?

How forestry investment is done and how it can be done has changed with time. We saw that many of our investors would invest across several of our syndicated investments to create diversity. We realized that we could establish this for our clients in an easy, professionally managed investment vehicle.

Awatea Forest Fund uses scale to own multiple forest assets and to provide multiple layers of diversification. When we think of diversification, we are thinking about risk-adjusted returns. Put simply, the fund owns forests across different regions, with different tree species, different age classes, and different revenue drivers, meaning we can generate regular returns from the activities of the funds' forests while reducing the reliance upon a singular forest.

Awatea is one of a kind with respect to its diversification features, its liquidity features, and its intended structure of returns, targeting regular cash distributions along with capital growth through to harvest.

The Awatea Fund has a strong emphasis on ESG principles, focusing on biodiversity, water, and soil conservation, and creating positive environmental impacts. Can you elaborate on how these principles are integrated into the fund's operational strategy and decision-making?

There is a significant opportunity within commercial forestry investment to generate environmental enhancement beyond what an ordinary forest might achieve. As Awatea is an evergreen investment, meaning the fund anticipates operating perpetually, it is of utmost importance that not only is the fund profitable, but that it is sustainable. Key initiatives are wrapped around both the type of land we afforest and what we do with that land.

Most significant are our initiatives surrounding species diversification, for example, Awatea has planted Redwoods as a significantly differentiated tree species with superior environmental traits, increasing stabilization of land and reducing sedimentation into waterways.

With the Awatea Fund targeting a diverse mix of forest properties across New Zealand, what challenges and opportunities do you foresee in achieving the fund's goal of owning 5000 hectares of production and carbon forest assets?

Achieving the desired scale involves two things, 1) having a strong investor backing, and 2) having the right opportunities in the market. We have been fortunate on both, backed by a long track record, the fund has already grown to $30 million of assets, owning around 2,000 hectares within four forest-growing regions of NZ.

Awatea has also enjoyed a very compelling investment period, where higher interest rates amongst other factors have driven down land prices, providing excellent entry points into scaled land and forest ownership. Those buying opportunities have been capitalised on and have partly contributed to our strong returns since inception, tracking at +10% per annum annualized growth. 2023 threw up its challenges when we look back to the cyclones and the resulting public sentiment surrounding forestry. Our forestry operations were resilient through this period with less than 0.3% damage to our managed estate, but not without its disruptions.

There is always a challenge to keep growing and to keep educating investors about forestry, this is something our great team has been achieving and we look forward to what 2024 brings.

Investment in forestry, particularly through funds like Awatea, offers unique opportunities for investors looking for sustainable and socially responsible options. How does the fund manage risk and ensure long-term, stable returns for its investors?

Like any sound investment, a key focus for Awatea is on diversification, as mentioned earlier, this stands Awatea apart from the rest, allowing the fund to make better risk-adjusted returns than what is otherwise achieved by a singular forest.

The fund invests in freehold land in the idyllic growing regions and is well located to infrastructure and services. That is the backbone of a good forestry investment. Additionally, the fund's returns are driven by both the sale of carbon and the harvest of timber. This gives us the ability to generate regular and more consistent returns, as our forests grow toward harvest, they are also sequestering carbon that can be sold.

Finally, RDNZ is a licensed managed investment scheme provider of forestry assets under the Financial Markets Conduct Act. We perform to strict legislation and our investors have further assurance in knowing that a statutory supervisor is overseeing their investment, benchmarking us to industry, and holding us accountable.

Finally, for potential investors interested in the Awatea Fund, what advice would you give them about considering forestry as part of their investment portfolio, especially in the context of New Zealand's unique environmental and economic landscape?

Naturally, we look at forestry with a long-term lens since a typical forest rotation is between 25 and 30 years. Therefore, an investment decision is often based on the long-term and fundamental drivers for the supply and demand of timber.

Globally, deforestation has been happening at an alarming rate, we are talking 10’s of millions of hectares, meanwhile, the fundamental drivers of demand are elevating with the typical drivers of demand (population growth, GDP per capita growth, and Urbanization) further supplemented by the advancement in wood technologies and an increasing requirement for renewable products. The World Bank has forecast global wood consumption out to 2050, expecting a three-fold increase in demand, this is significant. New Zealand, with high growth rates and proximity to high-growth continents, is ideally placed to take advantage of those strong fundamentals.

Now, the Emissions Trading Scheme and recognition of carbon stored in our forests creates an entirely differentiated revenue stream. The carbon element gives us the ability to focus on regular returns to our investors, and of course, is recognition for the climate solutions that are so importantly supplied by forestry. Forestry contains several other benefits, it is considered an inflation hedge, which is very topical, and forestry provides uncorrelated returns when compared to typical bond and equity portfolios, making a tangible forestry investment a key component of a well-structured portfolio.

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To learn more about Roger Dickie and the Awatea Fund visit their website here.