TIMBER

Investing in forests means growing, preserving and protecting a resource that regenerates itself through time. A typical timber investment consists of a portfolio of timber plantation diversified by age, species, geography, and protected by fire and diseases. After harvesting mature plants, new trees are planted to create a new life cycle. Over the past 20 years, some of the world's most prominent institutions among which pension funds, endowments and insurance companies have invested over 35 billion usd into this asset class, up from just 1 billion in late 80s.

Timberland returns have over-performed the stock market in the long run, with less volatility. Since 1987, the NCREIF Timberland Index, the most representative and dated index of the industry, registered an annual performance of 6% to 11%.

Timber is also a natural inflation hedge, often used to match long term liabilities. The key drivers of Timberland performance are related to:

• wood price
• land price
• biological growth

Biology accounts for 65% to 75% of timberland's performance. Nothing can stop biological growth from adding value to the timberland investments. Whether it rains or shines, trees grow. And so does their value. The main risk of timber is given by natural disasters such as fires and diseases. However, forestry management companies, hired by timber investment firms, work to protect the plantations against these issues. Investment firms focus exclusively on managing timberland portfolios by assessing and purchasing plantations globally diversified by countries, species, age classes, and sizes in order to provide a growing uncorrelated and self-sustainable asset class able to deliver uncorrelated returns to institutional investors.