US wealth expert: It pays to invest in forestry
One of the most respected wealth experts in the US has confirmed that forestry is a solid investment likely to yield strong returns.
Dennis Moon, managing director of specialty asset management at US Trust Bank of America Private Wealth Management, spoke at CNBC’s business news programme, Power Lunch recently about investing in forest land across the country.
“Farm, ranch and timberland are all great great hedges against inflation. Less than one per cent of all US crop and forest land is held by investment funds. This is a way to get into a hard asset class outside the stock and bond markets,” Mr Moon said.
With many investors struggling to find an asset class with a reliably solid yield, forestry is becoming of increasing interest and the comments made by Mr Moon’s – who has responsibility for real estate, farm and ranch, oil, gas and minerals, timberland and private business at his firm – show why.
As an asset class, farmland returned more than 20 per cent in income and combined appreciation over the course of 2015, data from the National Council of Real Estate Investment Fiduciaries confirmed. Indeed, over the last decade, the land returned more than eight per cent a year – an impressive level in any investor’s book.
Mr Moon added: “Land offers both long and short returns. You not only get the bounty from the property, you also own the actual land itself.”
While many investments in certain asset classes provide one source of revenue, forestry and land can offer the main return, as well as working hard to service other markets. These could include the housing and lumber market, the cardboard industry and the paper and pulp arena. This means that forestry is a flexible asset like no other.
As well as working across numerous markets, an investment portfolio containing timberland can also contain a number of diverse tree species. While high quality wood, such as hemlock and Douglas fir, often sourced from the Pacific Northwest, achieve major returns from international buyers, other trees such as maple or cherry can be used in the construction of furniture. As such, forestry can be made to work on a vast number of different levels.
Mr Moon reiterated the solidity and reliability of this form of asset class – a real positive in a continually turbulent global economic climate. “Timberland and farmland are not sexy, but they are steady. And in a volatile market, you could see net returns anywhere between three-and-a-half to four per cent short-term, and double digits long-term, depending upon your horizon. This is a unique and profitable asset class to own right now,” he said.
As well as the numerous positives listed above, perhaps the key reason to invest in forestry as an asset class is the certainty it provides. As Mr Moon said: “Trees will grow no matter what happens in the Middle East. Which is why investments in things you can touch and feel will never let you down.”
Chinese investors are said to be increasingly interested in investing in US forest land, according to recent reports from the Washington State Department of Natural Resources. China’s economic slowdown and recent stock market issues do not seem to have deadened interest in US agricultural property and farmland at all.
Indeed, John Knipe, president at Knipe Land Company, which specialises in land located in Idaho, Oregon, and Nevada, told CNBC: “We just did an offer for some Chinese investors for about 200,000 acres of timber ground in the Northwest. We’re not seeing a slowdown—maybe even a pickup in interest. You’re seeing people with serious money who want to move it out of China.”
James Barrett of GWD Forestry highlighted the continuing stability and reliability of forestry investments, confirming that they were a unique asset class. “Forestry has always been a solid investment in terms of strong returns. Add to that the feel good factor of investing in something environmentally friendly – and something which can be diversified to reap rewards across a number of markets – and, as Mr Moon says, forestry really can pay.”