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Case Study

Prime Forestry Group and Precious Woods (B): Pulp f(r)iction

By Benoit F. Leleux and Nir Berger

11 pages

November 2008

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Reference: IMD-3-2040

The 2004 information on investment opportunities in teak and other exotic timberlands at Prime Forestry and Precious Woods struck a chord with Ms. Richardson. Somehow, these investments seemed to combine very exciting financial returns with social responsibility. Even though the impact of her investments would probably be modest in the overall scheme of things in the world, she believed it was her duty to put some of her money to work for a worthy cause. She felt slightly more comfortable with the low-key approach of Precious Woods, and she liked the liquidity offered by the stock market listing. In the end, she decided to put all her eggs in that single basket. While quite similar, the two vehicles offered very different approaches to investing in tropical forestlands. One offered indirect ownership and diversification through a Swiss listed vehicle (Precious Woods); the other (Prime Forestry) offered direct ownership of a specific teak plantation, in a format reminiscent of the smallholder ownership programs often found in developing countries, hence with little diversification. They also differed in terms of their organizational structures, their exposure to different wood markets, the experience and track records of their managerial teams, etc. How did these investments fare?

Learning Objective

Discuss timberland as an alternative asset class. Analyze two real investment opportunities offered in 2004. Discuss sustainable investment and the rules of engagement for profitable investment. Investigate how the two investment vehicles fared over the next few years.

Keywords

Forestry, Ecological Management, Tropical Forest, Fraud, Fundraising, Asset Management, Private Equity

Settings

Latin America, Switzerland
Prime Forestry Group, Precious Woods, Manufacturing, Forestry
2003-2008

Type

Published Sources

Available Languages

English

Related material

Teaching note, Video

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