Investors branch out into forestry and timber | the appealing addition to pension fund portfolios
An in-depth study by award-winning research company, Reportlinker, gathered data from 2003, 2008 and 2013 in order to predict how past global housing market conditions could affect the future of investments in forestry and timber markets.
Focusing on housing demand and the growth in construction, the resulting data forecast the demand for new housing units would surge by 3.2% by 2018, subsequently leading to a worldwide rise in timber demand and consumption.
Continued stock market volatility and returns underperformance has led to a spike in interest in alternative investment projects – especially by those investors who have seen the value of their future pension pot plummet catastrophically.
Larger, institutional pension fund providers have been joined by smaller, superannuation funds in sowing their seeds of fortune in forestry and timber; and private investors, too are adding this successful asset class to their portfolios.
Forestry is considered to provide excellent portfolio diversification, chiefly because:
- It delivers attractive returns
- It’s risk-reward ratio is superior to other asset classes
- It is uncorrelated to other asset classes means little exposure to volatility
- It has positive correlation between returns and inflation
Financial experts point to consistency of income distribution coupled with the diversification that forestry returns bring to an overall portfolio as being the main draw for those investors seeking out the best opportunities to bolster their long-term pension plans; they have been joined too, by other, frustrated investors actively looking for a safer haven for their money.
The simple fact is, trees continue to grow, becoming more valuable with each passing day and are oblivious to what is happening in the economic world. If there is a downturn in the timber market, the trees are stored ‘on the stump’, i.e left to grow until the market improves. There are no negatives to this, only positives, because when the market does improve, the trees are then harvested and sold; more mature (bigger) and yielding more timber to sell into the marketplace.
A GWD representative commented; We have been debating in the office that the last paragraph above just repeats what we have said in the past many times. The sheer security of the investment lies in the fact that trees grow and don’t shrink; that they are always in demand as the population of the world grows – and always will be. Sustainable forestry is being invested into (to some degree or other) by every country in the world; whether it is to replace fossil fuels with biomass, or for basic necessities such as construction, means we have to point out that the statement above is just simple, enduring fact, and can’t be ignored. Timber is a solid investment, full stop – no matter what it will be used for, or for that matter, wherever in the world it will be used.