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| Natural Resources |
Sheltering Green
Kurt Akers
12/01/2003
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Institutional investors have been adding timberland to their investment portfolios for the last 20 years. But the poor performance of the stock markets in recent years has further spurred these investors to seek alternative investments to diversify their portfolios, including hedge funds, real estate, and timberland. Among these safe harbors, timber in particular has proven a valuable port of call.
 Institutions are not the only group that can benefit from the sheltering shade of timberland investment. Given the flurry of activity in timberland markets over the past several years, many individuals have begun to recognize the benefits as well.
What makes this "old economy" commodity such an attractive investment opportunity is not merely its historically strong returns (low double-digits over the past 15 years), but an assortment of unique characteristics:
 Low correlation with stocks and bonds – Timber prices do not track those of stocks and bonds. Likewise, the biologic growth of the trees has no relationship to the gyrations of the stock market or interest rates. The result? A portfolio that contains timberland is able to generate higher returns with lower risk than a portfolio that does not.
 Strong and flexible cash flows – Timberland investments have historically generated cash yields higher than the dividend rate for the stock market, while continuing to appreciate in value. Because biologic growth continues to occur regardless of the market environment, timberland owners have the ability to reduce cash flow in times of unfavorable pricing and to generate higher cash flows if the need arises.
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