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  • Timber investments on the rise, research finds

    2015 - 10.05

    Institutional investors are increasingly turning towards timber as attractive markets pop up around the world, new research has suggested.

    Boston-based forestland research firm RISI Inc. states that institutional capital invested in timber grew to more than $57 billion as of 30 June, which is up from less than $1 billion in 1989. And according to a recent article by Pension & Investments forestland is set for a great deal more investment over the coming years, with many companies ploughing their pension investments into this field.

    At present it is estimated that between 80 and 90 per cent of all timber investments are focused on the US, Canada, Australia and New Zealand. However, the 2015-2019 Timberland Investment Outlook from timber manager New Forests, a timber manager based in Sydney, predicts that this will change, with other markets developing, particularly in South America and Asia, as well as notable growth forecast for Europe.

    The reasons for this growth are that forestry is increasingly becoming recognised as a stable asset to invest in, as Greenwood Management has illustrated. Indeed, annual timber returns have been between nine per cent and 10 per cent over the past three years, according to the National Council of Real Estate Investment Fiduciaries' timberland indexes.

    Another reason, according to an institutional investor in the US, is the simplicity of the investment model. “A large portion of return comes just from biological growth — if the sun shines and the rain falls, the trees grow and along with them, our investment,” explained Vince Smith, head of the investment group of the New Mexico State Investment Council.

    The US is leading the way with timber investments; last month it was announced that three West Coast public pension funds committed more than half of the money to a new $1 billion timber investment partnership sponsored by Plum Creek Timber Company and Silver Creek Capital Management.

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