Investing with purpose and sustainability: Why commodity investments are also suitable for private investors
Focus topic

Apr 9, 2021

Commodities are regarded as an interesting alternative return and reasonable investment class, because they are largely independent of fluctuations on the stock market. However, many private investors consider this asset class to be a complex form of investment and tend to place it in the realm of professionals. But this does not have to be the case. Sandalwood investments represent a veritable natural asset monopoly that is also suitable for private investment. Especially if, as with JC Sandalwood Invest 18, they already enrich the portfolio with affordable amounts.

Gold, silver, platinum, gem stones, also palladium and rare earths – not to mention other natural resources such as oil, water or wood: commodities as an asset class are very attractive to many investors. This is hardly surprising, since commodities are considered a very good investment to compensate for fluctuation risks on the securities side and to open up yield alternatives that tend to be inflation-protected. After all, with a mixed real asset strategy, interesting results can be achieved in volatile times when securities may not have the best ratios.

But how should investors go about selecting tangible assets? Buy gold and precious stones because they represent a historical means of payment, are in demand worldwide and actually always have a high substance? Or would it be better to focus on urgently needed commodities such as oil and palladium because they are continuously used for mobility, energy supply and industrial applications and the global hunger for these commodities is not diminishing? Moreover, what about silver, which is gradually running out but is equally needed in industry? Or platinum, whose annual output of about 200 tonnes is significantly lower than that of gold (2,500 tonnes)?

Price increases are independent of the stock market

"The concentration on natural material assets that are continuously used for a variety of applications makes sense for investors, of course. They thus benefit from an almost inevitable price increase mechanism that has very little, if anything, to do with price movements on the global stock exchanges. This is an interesting alternative for investors," says Peter Jäderberg from the entrepreneurial impact investor Jäderberg & Cie. in Hamburg, referring in particular to the company's own investment opportunity "JC Sandalwood". This is a real asset investment in sandalwood plantations in Australia, which Jäderberg & Cie. makes available to co-investors as the only partner of the operator Quintis.

But why is sandalwood so sought after? Sandalwood is threatened with extinction in the wild. Until a decade ago, over 90 percent of the international supply came from India. There, however, the sandalwood stock has shrunk to a fraction of its original size due to overexploitation and government restrictions. At the same time, experts believe that the global demand for high-quality sandalwood oil will continue to grow strongly, because in addition to cultural and religious applications in Hinduism and Buddhism, the raw material is also used medicinally, cosmetically and pharmaceutically. "The valuable essential oil is used in Ayurvedic and Traditional Chinese Medicine as well as more and more in the international pharmaceutical industry due to its manifold positive effects. It has been equally popular in perfumes for centuries, not only because of its fragrance, but because its very high boiling point makes it a superior carrier. Today, only expensive luxury perfumes can afford real sandalwood," Peter Jäderberg describes.

Quintis plantations as the only source of high-quality sandalwood oil

In the wild, sandalwood is becoming increasingly rare; in India, the population has been greatly minimised. "Therefore, investors in JC Sandalwood can talk about a natural asset monopoly. In the long run, Australia's Quintis plantations will be the only source that can significantly meet the demand for sandalwood and provide pharmaceutical-grade sandalwood oil."

This is also reflected in the projected returns. The Jäderberg & Cie. group now operates five sandalwood plantations with almost 350,000 sandalwood trees and more than one million host trees on 700 hectares, in the states of Northern Territory and Queensland. Annual distributions in the high single digits are planned from 2028 for the current more than 1,300 co-investors. "These are good omens for the exciting natural investment sandalwood, which is not only special in terms of its character, but also in terms of its yield prospects," Peter Jäderberg emphasises.

A growing raw material like a tree is particularly well suited to illustrate to children how sustainable asset building works.
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