Major American pension fund puts confidence in timber

Confidence in timber investment funds has been heightened after a major American state pension fund decided to put $500 million into timber.

Massachusetts Pension Reserves Investment Management Board (Mass PRIM) has decided to make the investment just three years after selling a $700 million section of its timber portfolio.

Senior timber investment officer at Mass PRIM, Tim Schlitzer, said it was a perfect time to reinvest in the long-term benefits that timber can provide.

"This commitment is a situation where we are rebuilding our timber portfolio," he said.

"For us timberland is viewed as a long-term asset class. I would estimate that other pension funds view timberland investing as a long-term investment as well."

The sale in 2007 occurred when Mass PRIM identified that US timber had reached the top of its market cycle. Their strategy is to buy timber assets at the current low point and to hold onto them in anticipation of demand returning in the long-term.

They are looking particularly at timber in the Pacific North-West area, where timber prices are down 15-20 per cent from a year ago.

Mass PRIM is seeking a 7-8% return on its timber investments. Its timber portfolio is worth approximately $1 billion, representing 2.3% of its total assets under management.