Forestry, an attractive and solid investment.
The forestry market has some attractive benefits, which makes it a unique, solid and sustainable investment. Read all about why investing in forestry could be attractive for you.
Timber offers a level of price stability over the long-term that is more comparable to fixed income instruments than to equity instruments. The biological and investment growth cycles are steady and predictable. In low-price years, timber can be left standing until more desirable pricing is available. When timberland is included in a diversified portfolio, returns tend to smooth over time, thereby reducing the overall portfolio’s risk level.
Timber investments can provide attractive returns.This return is the result of biological growth of the timber as well as product class jumps. With proper acquisition, active management and disposition, rates of return can be enhanced.
In addition to attractive risk-adjusted returns and low volatility, timberland investments enjoy low correlations with other asset classes. Combining timberland in a well diversified portfolio can lead to a more efficient portfolio. There tends to be a positive correlation between timberland returns and inflation. This indicates to a certain extent that timberland investments provide a hedge against inflation.
Favorable supply and demand
Historically, demand for wood products have a high correlation with worldwide population growth. World population is expected to increase 41% until the year 2050.
Because a tree’s life cycle does not require it to be harvested at any particular time, it can be left standing during lower price periods.
Although timberland investments are relatively illiquid, liquidity is normally achievable in a moderate period of time.
As mentioned before, the investment performance of timberland has a low correlation to traditional equity and fixed-income asset classes. It also tends to has a positive correlation to inflation. Timberland holdings, as a result, offer investors a sort of hedge against market downturns and inflation.
Timber is a renewable, natural resource that provides ecosystems with benefits such as clean air, clean water, wildlife habitat and carbon sequestration. Usage of timberland plantations ensures the preservation of natural forest lands for future generations.