Timberland investments: the ownership structure matters

Implications: Article highlights certain issues associated with changing timberland ownership trends and key implications associated with alternate ownership structures for timberland investments.   May overstate the case associated with 10-15 year time horizon issues.

Analysis: The article highlights the continued shift of industrial, investment grade timberlands from the forest products industry to institutional investors.  Timberland investments have been attractive to these investors for reasons including their historically strong risk-adjusted returns and their limited correlation with other asset classes.  In addition, institutional investors and timber REITs offer more efficient tax structures for owning timberlands and management strategies targeted to extracting full value from timberland assets.

The article may overstate the case on the 10-15 year time horizons.  The fact is that timberland investment managers continue to offer a wider array of investment vehicles that have no time limits, and the REIT structure is becoming increasingly popular for public and private entities interested in timberlands.  In this sense, the direct securitization of timberlands may be the bigger issue as it may dilute the correlation and portfolio benefits of these investments.