Why Timberland?
– Renewable resource
– May act as a hedge against inflation
– May provide flexibility with respect to harvesting
– Has a very low correlation to traditional asset classes
– Natural biological growth from 6% to 12% per annum
– High risk-adjusted returns as measured by the Sharpe ratio
– Separately managed accounts are a “pure play” investment
– Low volatility of returns as measured by standard deviation
– Can be used for a variety of products which may add material value
– The timing of thinnings and final harvest can be customized to create a cash flow ladder similar to a bond portfolio
– Ancillary income sources (e.g. recreational leases, pine straw sales, CRP payments, etc.) may offset property taxes and management fee expenses
“Over the last 25 years, timberland has outperformed all other major asset classes with an average annual return of 13.5%. Timberland has exceeded the returns from traditional assets like stocks and bonds, as well as other alternative assets, providing nearly double the return of private equity (7.0%) and commercial real estate (7.7%) and significantly greater return than venture capital (9.7%).”
TIAA-CREF, 2016
Our Approach
American Timber and Agriculture believes in educating our clients about how timberland can be integrated into a macro investment portfolio. Our team of professional money managers listens to our clients and custom designs a portfolio strategy unique to their specific situations. We welcome clients who are comfortable in the boardroom as well as those who would rather put on a pair of boots and walk the land with our in-house staff of consulting foresters.
Before we purchase a piece of property, we carefully analyze it, looking at ten major characteristics and grading each one relative to our proprietary grading scale. We believe that timberland management has four key activities for alpha return enhancement: the land purchase analysis and execution, the planting process and the seedling survival rate, the timing and process for thinnings, and the final harvest process and pricing. We attempt to outperform the market throughout each of these critical periods.
While some clients want to hold their land in perpetuity, we are sensitive to those with a shorter time horizon. We believe that investment liquidity is defined by both the speed at which an asset can be sold and the pricing discount the seller must accept to clear the market. At American Timber and Agriculture, we utilize proprietary strategies to improve real estate liquidity, allowing our clients to sell their land holdings quicker and with a smaller price concession.
“Timber is the only low-risk, high-return asset class in existence. People are not familiar with it. What they are not familiar with they avoid. But timber is the only commodity that has had a steadily rising price for 200 years, 100 years, 50 years, 10 years. And a unit of wood, just the price of a piece of wood-in real terms-beat the S&P over most of the 20th Century, from 1910 to 2000.”
Famed Investor Jeremy Grantham, Co-Founder and Chief Investment Strategist at GMO, LLC