Buying your own patch of woodland sounds very romantic and can offer some enticing tax advantages. But few investors can afford the high minimum costs, and then pay for the professional forestry management that is needed to realise commercial value. So for the ‘wood-be’ investor, there’s a compelling argument for actively-managed timber funds.

Managing forests involves a lot of work — keeping the forest clean, patrolling for pests and managing any problems that might occur before they become real hazards. But the biggest risk, according to Liane Luke of the Phaunos Timber Fund. is over-gearing. Taking on too much debt forces you to cut (because you have to service the debt) even when wood prices are low. So we use very little debt, if any.

Phaunos Timber Fund. a Guernsey-registered, closed-ended fund listed on the London Stock Exchange, seeks long-term total returns through a diversified global portfolio of timberland and timber-related investments. Describing itself as the only truly globally-diversified timberland investment portfolio in the marketplace today the fund is invested in companies in the US, Latin America, Africa and the Far East, amongst others. The fund’s asset value has risen 8 per cent over last year, but the share price was beaten down by the global financial crisis.

While a timber fund is usually seen as a growth investment, there are income plays too — like the Cambium Timberland fund, which yields 4.1 per cent and trades at a discount of 24 per cent. Clearly, it offers value, but value that is likely to take a long time to be realised, remarks Tim Cockerill, head of investment research at Ashcourt Rowan .

Jersey-domiciled and listed on the Alternative Investment Market (Aim), Cambium invests in forestry-based properties that can be managed on an environmentally and socially sustainable basis. The fund is fully invested in 10 properties, providing around 60 per cent exposure to developed geographies such as North America, Australia and New Zealand and 40 per cent to developing geographies such as South America and Asia/Pacific.

Other interesting offerings include the Pictet Timber Fund, a Luxembourg-registered Sicav (only available in euros, dollars or Swiss francs). But if you want a broader spread, you could opt Pictet Global Megatrend Selectio n. which is a combination of all Pictet’s thematic fund products within a single fund. including timber. Pictet is renowned for its management of specialist equities and a strong focus on risk management.

The Quadris Environmental Fund. registered in the Isle of Man, but with UK-based investment managers, invests in teak plantations in Brazil which have been grown successfully in this region since the 1970s. The fund has a minimum investment amount of 1,000. Skandia’s Alternative Investments fund. a multi-manager fund, also invests a proportion of its assets into timber. But remember, Skandia’s funds can only be accessed via an independent financial adviser (IFA), and this one comes with a total expense ratio (TER) well in excess of 2 per cent.

If you’re looking for a more cost-competitive offering, the iShares Global Timber ETF (exchange-traded fund) follows an index of the 25 largest and most liquid listed companies involved in timber and forestry, and comes with a competitive TER of 0.65 per cent.