Two insurance units of South Korea's Dongbu Group will commit KRW45 billion (US$40 million) to a timberland and farmland fund managed by Boston-based Hancock Natural Resource Group, marking the first investment by South Korean institutional investors in a global timberland fund.
Dongbu Insurance and Dongbu Life Insurance will invest in the fund through a domestic vehicle, Dongbu Global Raw Material Fund.
The open-end fund is seeking to raise KRW500 billion in aggregate and will invest in farmlands and timberlands through subsidiary companies of the US real asset investment firm, part of Manulife Asset Management Co, reported The Korea Economic Daily.
The seven-year fund of Hancock will acquire lands available for timber and farm production, and develop or transform them into timberlands and farmlands producing pistachio nuts, almonds and other crops. It guarantees annual returns of at least 4% and allows for early redemption after three years of the fund inception, according to sources with knowledge of the matter .
A possible rise in land values and strong demand for farm products could push the return further higher to above 20% than the expected 9% to 11%, the sources added.