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The enduring case for timberland
Enduring principles support the fundamental case for timberland investing
- Principle 1 | Strong market fundamentals: Investing in timberland is a fundamental way to benefit from growing worldwide demand for wood. As populations expand and become wealthier, their large and growing wood demand provides attractive opportunities for timberland investors in key geographies.
- Principle 2 | Potential for attractive returns: Since inception, NCREIF timberland returns appear highly competitive with traditional asset classes.
- Principle 3 | Lack of correlation with other asset classes: Over the past several decades, U.S. timberland returns have exhibited a lack of correlation with traditional asset classes.
- Principle 4 | A hedge against inflation: Timberland continues to provide investors with a reliable hedge against inflation.
The asset class’s unique characteristics also provided portfolio-level benefits that have made timberland an enduring part of many institutional portfolios.
The case for investing in timberland remains compelling despite the market’s evolution:
- Demand for wood and related products is likely to increase with global economic growth, particularly in emerging markets.
- Although returns have moderated in the past 10 years with the slow housing recovery, timberland has continued to outperform U.S. equities on a risk-adjusted basis due to its low volatility.
- The asset class has provided powerful diversification benefits based on consistently low or negative correlations with traditional asset classes.
- Timberland is likely to remain a reliable hedge against inflation.
Nuveen and GreenWood Resources employ three key strategies to increase timber returns:
- Global diversification for exposure to faster-growing markets
- Impact investing to maximize timberland’s potential environmental benefits
- Return enhancers to provide potential for higher alpha