Investors Run To The Forests For Protection Against Stock Downturns
Investment in timber has been an increasingly popular and lucrative choice
for both institutional and high net worth investors in recent times, although
the asset class has largely escaped the attention of the world’s hedge
funds, recent reports suggest. These ‘timberland’ investment as they are known, offer the investor
a number of advantages besides returns that have consistently outpaced that
of equities over the last couple of decades. Timber is uncorrelated to most conventional financial instruments such as stocks
or bonds, and therefore provides a useful portfolio diversification tool as
well as a good hedge against the ups and downs of the stock market. It is also known to have a negative correlation to the real estate market,
and can act as a good hedge against inflation. For these reasons, investors, which include some of America’s largest
pension and endowments funds like Calpers, Harvard and Yale, have been increasingly
attracted to timber, investing through Timberland Investment Management Organisations,
or TIMOs. According to a study by the Global Institute of Sustainable Forestry at Yale
University, institutional investment in timberland increased from about $1 billion
in 1989 to about $14.4 billion in 2002, the most recent year covered by the
study. Moreover, between 1988 and 2003, annual returns from timberland reached 15%,
according to the NAREIF Timberland Property Index, outpacing both the bond and
equity markets. A comprehensive report in our Intelligence Report series examining tax-efficient investment in forests, film production and venture capital is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report5.asp
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