Land development in Russia – a disappointment

2010 was a year when most investors and investment companies looked ahead. The financial crisis lied behind us and there were a number of investment opportunities with attractive valuations. One investment area that seemed promising at the time was land investment in Russia. The Russian population had very little housing debt, land cost was low, and there was a huge surge in demand for housing.

The company “Jibréus & Ölvestad Alternativa Investeringar” (www.alternativainvesteringar.se) is a Swedish company focusing on marketing and selling alternative investments. In this case Alternativa Investeringar was the investment broker for “Realfond Ryssland”, a newly founded company (fund) with the aim to seize the attractive land investment opportunities in Russia.

 

The business idea was simple: to buy large plot of lands in attractive areas near large Russian cities such as Moscow, divide them into smaller pieces and create roads and electricity to the property borders to prepare them for building houses, and finally sell them off with a high profit. The investment period would be three years and the investment would be a closed fund during the period. One of the company’s current board members (I believe he started as the CEO of the company) had done similar business before in Russia and claimed that 25% yearly returns would be achievable. It sounds good, doesn’t it? I believed him, and so did others. My wife and I invested with this company with high expectations - 25% per year would almost double our money in three years!

So how did it go…?

Well, now a few years down the road we have the results. 25% per year became roughly 1,5% per year… (I bought the fund shares for 115 SEK and now three years later it is worth 120 SEK).

Apparently, the reason why this investment hasn’t developed as planned is that the company is facing a lot of competition which they hadn’t foreseen (the Due Diligence seems to have been missing when they did their analysis… and maybe we should have done one as well J). And this has led to another problem, not only is the return extremely low compared to what was promised (or “predicted” as they say – not promised), now the company has problems liquidating the fund without making a bad deal with the purchased land. So the solution offered to all investors is to convert the shares in the investment fund into a property developing company called Norrpada (www.norrpada.se). Norrpada would bring a value-adding component to the investors and the investment fund by building houses on the invested land. Thereby the land would be easier to sell and it would also increase the returns on the investment. The company Norrpada aims to go public in 2014 which would create a possible exit strategy for the investors in Realfond Ryssland. But suddenly having stocks in a public traded company creates the risk that the share price might drop if the company’s plan doesn’t live up to expectations, and of course we have the psychology factor on the market... However, this seems to be the only viable option for us investors in Realfond Ryssland because it would be extremely difficult to realize our invested money if we stay in the investment fund. So, let’s hope that Norrpada is the path to success this time… I will update you how this adventure goes...

 

Teak investment Belem Sky in Brazil with Emerald Knight Consultants and Global Forestry Investments (GFI)

 

 

 

 

 

 

 

 

Brazil is a popular country for alternative investments. It has a politically stable environment and a fairly strong and growing economy. It is one of the top ten largest economies in the world, and one of the famous BRIC-countries with a relatively high GDP-growth.

This investment (which I made in year 2012) is in a teak plantation in Brazil. The investment broker I used was Emerald Knight Consultants, a British company specializing in providing sustainable and ethical investments with high returns. The company is only marketing investment products and the contract is signed directly with the product provider. In this case, the product provider is Global Forestry Investments (GFI), a timberland investment company focusing on sustainable forestry investments. GFI also has a long term goal to help the local community in Brazil by working together with the local government and plans to build a school for the locals. GFI has offices in Brazil, UK and Dubai.

The teak plantation is located in Belem, in the region Para north east of Brazil, and the investment project is named Belem Sky plantation. I have purchased 0.1 hectares where around 100 trees are grown, managed by GFI with partners during the investment period. The trees are already eight years old and the plan is to do the final harvest in 15-18 years. There is an option to resell the trees after three years to GFI with a capital uplift of five percent. During the investment period there will be thinning of trees (selective removing trees to improve growth rate of remaining trees) around four times, which will provide extra dividends the year after the thinning since the removed trees can be sold. The expected average return is 10% per year over the investment period.
 

 

The figure above shows the Belem area by Google maps, marked with an “A”

A few years ago I invested in another teak project, in Panama. So why do another one? Well, there are two main reasons. Firstly, if I invested in this teak project through Emerald Knights, I would get access to another more lucrative investment (more about this investment in a later blog posting). Secondly, timber has historically been a very safe investment class with good returns. The teak price has increased steadily over the past 20 years and has a broad usage within both industry and private consumer industry. Also, teak is resistant against fungus, insects, fire and challenging weather conditions, making it a sturdy timber class.

 

The photo above illustrates how timber has shown attractive returns over the years in comparison to other investment classes (figure from Emerald Knight Belem Sky investment prospect)

It all sounds pretty good but how has this investment performed this far?

I was initially excited about this investment - pretty good returns and investing in something that brings something good to the locals in Brazil. The returns from the thinning process 2012 (around 10% of initial investment) were going to be paid out in January this year. Unfortunately this didn't happen and there was no communication about it from GFI until March when I emailed them and asked for the returns... The reason was apparently that it had been severe weather in the Belem region with heavy rainfalls that had delayed the thinning process. It seemed to be a fair explanation and I would have been ok with this little hiccup in the investment process but the payment delay continued. And continued... I still haven't received the promised payment and now it is eight month delayed! GFI has come up with more reasons for the delay but all is perceived as quite unprofessional to me. Emerald Knight has recently established a specific email-address for questions related to this issue so there seems to be quite a few investors experiencing the same problem... Maybe it is the first time GFI has this kind of project and I and the others investors waiting for money are “guinea pigs”? I hope not, but it sure seems that way. GFI has promised a compensation for the delay but I will believe it the day I see the money. My wife is quite pissed at me since I invested our common money and she is nagging me about it every other day – so I really hope I will see that money soon, especially since she doesn’t want to discuss new investments until I retrieve the funds!

 

Investment summary

 

I will update if and when I receive my funds, so stay tuned and subscribe to my blog (at the top right on my blog) - don’t miss out on more interesting stories!

Eucalyptus forestry investment in Brazil with Greenwood Management

 

One of the investments I made last year must be one of the most difficult to spell: Eucalyptus!

Eucalyptus is a type of tree that is very common in Australia and was introduced to Brazil in 1910, for timber substitution and the charcoal industry. It has thrived in the local environment, and today there are around 5 million hectares planted. The wood is highly valued by the charcoal and pulp and paper industries. Brazil's plantations have world-record rates of growth, typically over 40 cubic metres per hectare per year, and commercial harvesting occurs after year 5. The local iron producers in Brazil rely heavily on sustainably grown Eucalyptus for charcoal; this has greatly pushed up the price of charcoal in recent years. The plantations are generally owned and operated for national and international industry by timber asset companies such as Thomson Forestry, Greenwood Management or cellulose producers such as Aracruz Celluloseand Stora Enso (Source: Wikipedia.com).

This particular investment has been made with Greenwood Management, which is one of the leading forestry asset management companies in Europe. Greenwood Management has offices in several countries in Europe such as Denmark, Spain and Portugal but also in North America (Canada).

The investment idea is to have private investors to invest in large scale forestry operations. In this case Eucalyptus in Brazil, and during the investment period (6-8 years) Greenwood Management will actively manage the investment. Once the investment period is over, the Eucalyptus will be used for char-coal.

According to the investment prospect, the Brazilian congress has recently passed a law that required all steel producers to use char-coal from non-native species instead of using the fossil fuel coking coal, in order to lower CO₂ emissions. And the use of charcoal made from naturally growing native trees will be banned to combat deforestation. The underlying profitable assumption for this investment is that the price of charcoal made of eucalyptus will increase.
 

I have this far had a positive impression of Greenwood Management. The initial investment process was easy, the account manager was professional, and I have this far received several newsletters describing the progress of the investments and Greenwood Management’s co-operation with local university focusing on agriculture. However, if I would have been them I would have given me calls more often (I haven’t received any since I made the investment) to try to sell more investment products! But on the other hand, it is nice with a company not pushing the investment portfolio too much. Also, a referral scheme has been available which could be beneficial for the investor if he/she has friends that might be interested to invest!

Investment summary
Investment level (Low: 0-5 000 EUR/7 000USD, Medium: 10 000 EUR/14 000 USD, High: >10 000 EUR/14 000 USD)	Medium.
Risk (low, medium, high)	Medium. In general forestry investments are considered low risk, but the char-coal prices have fluctuated quite a lot during the past. Since the investment is based on this parameter I see this as a medium risk.
Estimated ROI per year	Around 11%.
Length of investment (<1 year short, 1-5 years medium, > 5 years long)	Long. Around 5-7 years

 
I will keep you updated on my blog about the progress of this investment since I still have a few years to go before the investment is done. So stay tuned and subscribe to my blog (at the top right on my blog) - don’t miss out on more interesting stories!

Note: photos above come from the Eucalyptus investment prospect of Greenwood management

 

Brazilian social housing investment “minha casa, minha vida” - Bosque Residencial

 

 

“With a population now exceeding 200 million, Brazil needs more houses! Lower-income families are facing a housing deficit of 8 million homes, set to grow to over 12 million by 2023. We are helping to solve their problem.”

 

 

This is how the investment prospect starts to describe the investment that I have made recently. The investment is a “social housing investment”, which I have made through Emerald Knight Consultants, an investment broker specializing in Socially Responsible & Sustainable Investments (http://www.emeraldknightconsultants.com/). The issuing company of the investment is EcoHouse Developments, an award winning property developer of social housing programme in Brazil (http://www.ecohousedevelopments.com/). “EcoHouse was founded in June 2009 and are now a global organisation with an annual turnover of 65M and offices in London, England - Natal, Brazil - Toronto, Canada - Dubai, UAE and Singapore. We have an expanding workforce of over 1040 full time employees across the globe which includes over 900 full time buildcrew onsite in Natal, Brazil.”

So what is a social housing?

EcoHouse Developments describes the social housing investment as following:

‘Social housing’ is a term used for homes provided by a government for families with modest incomes. The economy of Brazil has now grown to become the 6^th biggest in the world (overtaking the UK at the end of 2011) and is continuing to rise. This means that the demand for housing has of course increased. Property supply simply can’t keep up with demand and added to this millions of families in Brazil already live in sub standard housing. In 2009 the government decided to act decisively to tackle this problem. So the Minha Casa, Minha Vida social housing scheme was launched! The ‘MCMV’ scheme aims to build three million homes over a five-year period. This big investment has a government budget of around R$100 billion (approx £40 billion/US$65 billion/€ 45 billion). The first phase of Minha Casa, Minha Vida Brazil was launched in early 2009 and aimed initially to build a million houses throughout Brazil. In June 2011 the government announced the start of a second phase comprising a further two million properties.

How does the investment work?

The investment is quite simple. Private persons invest in off-plan property developments in Brazil. Once the property is built and sold to an individual in Brazil, the investor gets the invested money back. Plus a 20% interest rate - in one year!

So why did I invest in this?

There are a number of attractive reasons why I did this investment. Some of them are (not individually ranked):

·         High returns. The returns are set to 20% within 12 month. Not bad!

·         Short-medium investment horizon. The 12 months investment period is a good short investment period, so my money is not tied up too long. Also, there is a chance to prolong the investment period with a similar investment with the same company (a three year investment if I have understood it correctly)

·         Brazil is an excellent place to invest in and the investment type is in high demand. Being one of the famous BRIC-countries, Brazil is definitely a good place to invest in. It has rapid growing economy with high GDP-growth and has a high housing deficit. The picture below illustrates this very well:

 

Picture above comes from the EcoHouse investment prospect

·         A proven investment. The developer is an award winning developer with offices worldwide with proven track record and identical projects already delivered on time. According to Emerald Knight, investors in EcoHouse’s previous investments have received their money back earlier than the agreed 12 months!

·         A social responsible investment. Helping to solve the housing deficit by building houses for people in need of properties with good standard

·         A relatively safe investment. The investment is backed up by the Brazilian government and protected by a Lloyds TSB Escrow facility that offers 100% security. The worst case scenario in the project is that all money is returned to the investor if the project does not go ahead for whatever reason

I will write more about this investment in later postings so you can see if this investment turned out as planned! In one of my next postings I will write about the results from an exciting investment I have made – a carbon credit investment. So stay tuned and subscribe to my blog (at the top right on my blog) - don’t miss out on more interesting stories!

(Flag-picture above from: bestflag.blogspot.se/2012/09/brazil-flag.html)

A successful forestry investment – investing in Baltic forest with Europiska skogsfonden (The European forestry fund)

Forestry is one of the more common ways to invest in when it comes to alternative investments and there are a lot of prospects out there. I can see why this investment type is popular. One of the major advantages is that forestry is considered to give a steady and predictable return. +10% annual returns are not unusual. The predictability of the returns is highly appreciated in the current volatile financial market. Looking in the rear-mirror, forestry investments has in general outperformed the stock-market the past decade - with lower risk!

Investors need to have a medium to a long term investment perspective (from a few years to decades), depending on the type of forestry and investment type. I have personally invested in several different forestry investments and you will be able to read about all about them in my blog (I have written about my teak investment in a previous posting).

This post is about my investment in a fund investing in Baltic forest. I have invested with www.euroforest.se  (Europeiska Skogsfonden – The European Forestry fund), a company specializing in investing in forest in the European Union with a focus on Eastern Europe. Two of the company’s important reasons why this would be a good investment is that forest in the Eastern Europe is cheaper than other countries in Europe and therefore has a potential higher price development, and secondly, best practice forest maintenance is applied which contributes to higher returns. The predicted return on this investment is 10-12% per year, of which 2-5% is yearly dividends. This far the fund has delivered as following:

Development in percent (dividends within brackets)

2011	2012	2013	Since the beginning
+13,2 (3,2) %	+12,4 (1,5) %	xx,x (3,0) %	+34,3 (7,7) %

Figures from: http://www.euroforest.se/historik 

The goals for return on investment have been exceeded every year, giving investors 34,4% since the start – not bad!

I invested in a closed fund that was set up in 2010 and will be locked for five years in total. Hopefully the remaining years will be just as profitable! The fund is regulated by the Swedish finance authorities, which for me is a proof of quality and that everything is managed correctly. Good to know so I can sleep well at night J 

If you consider investing in this fund or a similar one, make sure you don’t need your money during the lock-up time. Also, the minimum investment is often quite high, in this particular case it is about 5 000 EUR.

Next time I will write about an exciting investment I recently have made in Brazil. So stay tuned and subscribe to my blog (at the top right on my blog) - don’t miss out on more interesting stories!

16% annual return from a property investment?

 

 

 

 

 

 

 

Recently I have invested in an alternative investment that according to the prospect will give 16% ROI per year with a maximum investment period of three years. Not bad if this investment will work (fingers crossed!).

The investment is a property development, a luxury eco-resort on an island in the Panamanian Caribbean named Sarani Resort. Panama was voted as the best tourist destination for 2012 by New York Times, and is currently experiencing a tourist boom. Also, ecotourism is among the fastest growing travel trends (http://www.pcbeach.org/ecotourism/ecotourism-in-pcb) and the goal with the Sarani Resort development is to be the region’s most luxurious eco-resort.

I invest through the broker Cavendish Blue (www.cavendishblue.com) that describes the investment opportunity like this:

“A limited opportunity to invest in the early stages of the eco-luxury Sarani Resort and benefit from contracted returns of 16%pa with 100% deposit protection. Investors also benefit from a contractual buy back guarantee from the developer within a maximum 3 year timeframe.”

The investment process has worked well this far. Cavendish Blue has been professional, provided instructions that have been easy to follow how to proceed with the investment (which were necessary – it was a lot of paperwork to fill in!), and gave quick feedback during our correspondence.

So what made me invest in this property development?

·         It seems to be a quite safe investment with attractive potential returns; 16% per annum is very good returns for me, considering that I see the risk as fairly low.  The key factors why I believe this as a low investment risk are:

o   I consider Cavendish Blue as reliable to invest with. Cavendish Blue is a quite new player on the market, but it has a good foundation. The company operates under the same company as IPIN (International Property Investment Network, http://www.ipinglobal.com) which is well known. As I understand it, Cavendish Blue has a short-term investment focus, while IPIN often has a long investment focus

o   Cavendish Blue has worked with the property developer before and that co-operation turned out well. This fact increases the chances for a successful co-operation this time as well

o   Deposit protection against developer default, meaning I should be able to get my invested money back in case the development fails

·         The investment timeframe of maximum three years suits me well for where I am right now from a personal standpoint

·          The investment prospect is approved by my wife J (co-investor)

On top of the attractive potential returns, there is also an opportunity to stay one week at the resort for free once it is completed. I am already looking forward to this great perk! I have 18 month to exercise this right after the facilities have opened.

I will write more about this investment in my future blogs so you will know how it performs. So stay tuned and subscribe to my blog (at the top right on my blog) - don’t miss out on more interesting stories!

Picture above from: www.cavendishblue.com

My personal experience from stock market trading robots, auto-trading

In my last blog I wrote about my experiences from forex robot trading. In this post I am writing about my experiences from using two stock market trading robots. It all started in in early 2012 when I was searching for companies providing stock trading robots and I found the company Autostock (http://autostock.se/homeold).

I bought the stock trading platform product Nordnet Autotrader (that I intended to use for both robot trading and my own “manual” trading), which Autostock has developed. With the platform came a free trading robot for one year, “Coda OMX” (trading OMXS30-index). I decided to invest in one more trading robot, “Adagio” (stock futures and ETN trading), to get a better evaluation of Autostock. The results were stunning from both robots when I started with them (about nine month ago), but since then the results has gotten worse. See pictures below. Good to know is that some of the historical data had been back-tested by Autostock.

 

Picture above: Adagio-results (http://autostock.se/produkter/adagio)

Picture above: Coda OMX-results (http://autostock.se/produkter/coda)

Because of bad results from Coda OMX I was allowed to change to Coda DAX (robot trading on the German stock market) for a few month ago, as Coda DAX had performed better than Coda OMX. Also, after last summer I changed the product Adagio to ACDC because of not satisfying results.

Picture above: Coda DAX-results (http://autostock.se/produkter/coda-dax)

Picture above: ACDC-results (http://autostock.se/produkter/acdc)

How the trading robots are set up…

So how it worked was that the trading platform needs to be installed on your computer (or on a server). Then Autostock sends you an access code for the robot which you use to install the robot on the trading platform. Some configuration is also needed on the trading platform. There are instructions for this, but you can also get support from Autostock. Once this is done, the robot needs to be connected to an account where you have your money. After this the robot can start trading on the stock market with your money from your account.

 

What was my verdict for this robot trading investment..?

I have summarized my impressions as below:

Positive

·         Very good support
·         Autostock holds courses regularly how to use their products
·         Good knowledge about stock trading, technical analysis etc.
·         Flexible. I was allowed to change robot during the license period (in the same price range)

Negative

·         Difficult to implement the trading robots on the trading platform, I was depending on Autostock’s help a lot (And updates came quite regularly so I had to contact them often for help. A more techie guy would probably not have the same problem as me J )
·         The trading results were not to my satisfaction L (Probably the most important factor of all above, I would most likely be happier in total having for instance bad support if I ended up with a lot of money in my pocket from the robots J )

As I mentioned the results were not that great. After this period using their trading robot strategies I have a loss of almost 900 USD, with an invested amount of about 15 000 USD. 

Description	SEK	USD
Invested amount to be used for robot trading (initial account status)	100 000	15 385
Current account status, after robots have been trading (about nine month)	94 355	14 516
Result	-       5 645	-        868

But it is important to have in mind that there are also a lot of “running costs” related to this kind of investment. You need to pay a license fee to be able to use the robots, license fee for the trading platform etc. These costs are often neglected “hidden” costs that people don’t think about! This is what it looks like to me this far:

Description	SEK	USD	Comment
Nordnet Autotrader- trading platform cost	3 980	612	The yearly fee was 612 USD it but could also have been paid quarterly. Buying a one-year license gave me a "package" with the trading robot Coda. And the platform is needed to use the trading robots
Server cost	3 321	511	Since the robot only trades when I have my computer on at home, I chose to buy the service from Autostock to have the trading platform (and the robots) installed on a server that is online 24/7. Thereby I wouldn't miss out any trades. Cost: 31 USD/month
Robot "Coda"	0	0	Free of charge when I bought the trading platform
Robot "ACDC"	2 485	382	Paid quarterly. Yearly cost: 612 USD. I received a 40 USD discount when I bought the trading platform for one year
Total / Break-even figure	9 786	1 506

As you can see, the robots would have to generate a profit of 1 500 USD before I would actually have made any profit from the robot trading (which with my initial investment amount equals to about a 10% profit generation), when considering all trading related costs. And considering my results above from using the robots (-900 USD), I don’t need to say that this does not add up to break-even on this investment. So actually I didn’t lose 900 USD, I lost 2 400 USD in total!

So due to the high trading related costs, a fairly high amount of invested money for trading would be needed to generate a break-even figure (since if you would only invest 1 500 USD the robot would have to generate a 100% profit to break even) - and the trading robots would also need to perform well over time. Another reason to have the robots trading with a significant amount of money is that the “transaction cost” (stock market commission) when trading could actually eat up the profit, if too small amounts are traded!

The stock markets the past year has performed quite well, so in hindsight I would have been better off investing in an index fund rather than these trading robots. An index fund would also have much lower “running costs”, in some cases zero.

Next postings…

I have found a stock market signal provider for buying/selling stock futures that shows really good results (I know, basically same story as the robots above – but this time hopefully the results will be consistent over time. I am a trading optimist and I do believe in auto-trading. Sooner or later I WILL find a great auto-trading product. Please email me if you have any suggestions! J ). I intend to test this signal provider for a few months and will tell you if it actually works or not in a posting later on.

I have stopped using the Autostock products for the moment. Some of the money I have released from Autostock I have invested in a very interesting alternative product that I will write about soon. I will also write about some successful alternative investments of mine very soon. More of these teasers in my upcoming posters… So stay tuned and subscribe to my blog (at the top right on my blog) - don’t miss out on more interesting stories!