Appetite for timberland investment to rise in 2018
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A number of institutional investors around the world have increased their exposure to agriculture and timberland in a trend that is likely to continue into 2018, according to recent analysis by IPE Real Assets.
Those involved in the tangible assets investment industry claim that yields have fallen for some categories, including real estate and infrastructure, which has resulted in investors looking to make sure their portfolios become ever-more diversified.
One such insider, Guy Hopwood of bfinance, explained that institutional investors have been increasingly directing their money towards natural resources, including farmland and timberland. He explained: “We have seen demand increase for these asset classes in 2017 and expect that trend to continue in 2018.
“This comes from a variety of geographies and investor types: the greatest activity today is from pension funds and other institutions in Australia, Canada, the UK and the US, but we expect this to broaden across Europe during 2018,” he added.
Writing for IPE Real Assets, Razak Musah Baba gave examples of the recent moves towards natural resources as alternative asset classes. The examples included Industry Super Australia’s call for the country’s superannuation fund industry to increase its exposure to agriculture, timberland, farmland and aquaculture from 0.3 per cent to 1 per cent.
Another example was the New Mexico Educational Retirement Board investing US$30m in Folium Investments, which manages funds invested in agricultural assets.
Hopwood added that a greater demand for diversification, both in terms of geography of investment and asset class, has spurred the increase in interest in assets such as forestry. He stated: “Today we see a much larger universe of asset management offerings available in both agriculture and timber – particularly agriculture, which is going through its first wave of institutionalisation.”
Another industry commentator, Jay Yoder of Pavilion Alternatives, was quoted in the article, explaining that supply issues in Western Canada means that competition from the country is falling back, while US mill capacity grows. “The future may be brighter for timber investors,” added Yoder.
Another industry insider said that he expects the appetite for sustainable investment to grow further in 2018 and that investing in timberland and farmland is inherently suited to this.
GWD Forestry‘s spokesperson, James Barrett, responded to the report, adding: “ It’s no surprise to us that the demand for sustainable asset classes is on the rise and that forestry fits perfectly into this category. We too believe that the forestry investment industry will be buoyant in 2018 and that investors can expect to see returns increase off the back of a healthy timber market.”