Timber is a growing asset class with historically strong returns
- Timber has outperformed the S&P 500 over the past 20 years
- Strong risk-to-return ratio
- Growing demand and decreasing supply
- A renewable resource
Over the past 20 years, timber investments have outperformed broad market indices while maintaining low volatility. With an attractive risk-reward ratio, timber offers investors a smart way to diversify their holdings.
The industry is usually judged by the performance of the Timberland Index which is published by the National Council of Real Estate Investment Fiduciaries (NCREIF). Looking at average returns from 1990-2009, timberland outperformed the S&P 500 by over 3% but also had lower volatility. While this index incorporates land appreciation and considers US-only investments, its performance still makes a strong case for timber investing as a whole.
Increasing demand and shrinking supply means rising prices
The world’s supply of timber is decreasing as governments ban the logging of old growth forests and logged forests are converted to agricultural land or pasture. At the same time, developing countries are increasing their consumption of raw lumber. Chinese tropical log imports alone grew 35% between 2009-2010. Plantation timber can help meet this growing demand while easing the pressure on biodiverse old growth forests.
Tropical forestry investments help supply the market with valuable timbers, such as Balsamo
Timber is a renewable resource
Trees are a renewable asset that can foment local biodiversity and replenish degraded land. With proper management forests can be harvested and replanted while preserving local ecosystems. Our plantations are located in the moist tropics of Panama, an ideal location for sustainable forestry because of the fast growth of trees and the wealth of biodiversity.