Do you know what asset class didn’t have its biggest loss of the year this week? That would be your #timberland asset. The one that is steadily growing, on average of about 8% per year. Biological growth and land appreciation are happening, no matter what happens with international trade and the stock market. Those returns don’t include the tax arbitrage and conservation finance opportunities that a timberland owner has during the lifetime of the investment.
Timberland is generally considered to have a negative correlation with the traditional equities market. This is especially true in a direct investment, like owning the land and timber.
Institutional investors have been using timber to diversify portfolios for over 30 years. These are typically managed by TIMOs in funds. Current markets have become more competitive, and traditional returns are harder to obtain for TIMOs due to the cost of management and closed-end nature of the investment, which can force a hard timeline for disposition.
Private timberland owners making a direct capital allocation have an advantage over the commingled fund investment in that they can make decisions that are strategic for a specific asset and make market decisions that are happening in real time.
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