Past performance – U.S. timberland investments have delivered a 10-year annualized return of 5.55% as of June 30, 2017,1 while Molpus-managed timberland investments averaged significantly higher returns for the same time period2.
Low volatility – Timber offers a level of price stability over the long term that is more comparable to bonds than stocks. 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.
"Enhanced" returns – The total return is enhanced by the biological growth of the timber as well as product class jumps. With proper acquisition, active management and disposition, rates of return can be enhanced.
Favorable supply and demand – Historically, demand for wood products has tracked closely with worldwide population growth. World population is expected to increase 34% by the year 2050.3
Rapid growth of investment – Investment in American timberland, particularly from institutional investors, continues to grow. This increase could ultimately push the price of timberland higher as buyers compete for available land.
Flexible harvesting – Because a tree’s life cycle does not require it to be harvested at any particular time, it can be left standing during poor price periods.
Liquidity – Liquidity of the timberland investment is achievable in a moderate period of time.
Diversification – The investment performance of timberland has low equity correlation and extremely low fixed-income correlation. It also has a positive correlation to inflation. Timberland holdings, as a result, offer investors a hedge against market downturns and inflation.
Tax advantages – Under current tax laws, timber investments receive favorable capital gains treatment on harvest sales. Loan interest is tax-deductible on non-recourse borrowing. The depletion allowance offers additional tax advantages.
Environmental responsibility – Timber is a renewable, natural resource that provides ecosystems with benefits such as clean air, clean water, wildlife habitat and carbon sequestration. Conservation ensures the preservation of forest lands for future generations.
1 NCREIF Timberland Index (Total) (June 30, 2017). Gross of management fees.
2 Molpus Woodlands Group. Returns are audited through 12/31/2016. In considering the performance of investments referred to in these materials, prospective timberland investors should keep in mind that prior performance of Molpus investments is not indicative of future results, and there can be no assurance that Molpus will achieve comparable results in the future.
3 Based on U.S. Census Bureau, International DataBase, March 2010 version.