Gresham House has raised an initial £15m (€16.6m) for its UK forestry fund.

The asset manager said its Gresham House Forestry Fund was backed by university college endowment funds, family offices and private individuals.

It is also co-investing £1.25m in the fund, for which Gresham House is aiming to raise £50m by mid-2017.

Richard Davidson, manager of the fund, said forestry, as a medium to long-term investment, was generally low risk.

“Trees grow both in volume and value as they mature, and a looming supply shortfall of timber in the UK will, we believe, push up timber prices,” he said.

“On top of that, renewable energy projects such as wind farms have provided an alternative income source.

“Unsurprisingly, forestry’s historic returns, ESG credentials and tax incentives have piqued investors’ interest. While once considered a niche investment, UK forestry is emerging from the shadows into the mainstream investment landscape.”

Davidson, formerly chief investment and chief European equity strategist at Morgan Stanley, recently told delegates at IPE Real Estate’s Real Assets & Infrastructure conference that forestry had been an “undiscovered area” for investors.

“Biological growth is unrelated to economics interest rates and markets,” he said.

UK timber prices, he said, are historically low, with long-term returns of between 7.5% and 10%.

“Our view is that prices will rise by 1% per year over next 10 years,” said Davidson, who joined the firm this year from Morgan Stanley.

The fund is targeting net annual returns of 10%.

Gresham House took over its forestry manager subsidiary Aitchesse as part of a move into real assets last November, paying £7.7m.

A portfolio of five forests has now been bought for the fund for around £12.1m, as reported in February. All of the assets are in Scotland, where the Scottish National Party is promising in its latest manifesto to create at least 2,000 acres of woodland on restored land over the next four years.

The SNP said it aims to plant 10,000 hectares of trees every year until 2022 and hasten the pace of application and approval of planting.