TIR Research Library

Chung-Hong Fu: Managing Director Economic Research and Analysis

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The NCREIF Timberland Index is a topic of increasing interest to institutional investors and investment consultants. In the past several years, while the public markets have experienced quite a bit of turbulence, questions have been raised about the veracity of the Index and how the asset class has performed in contrast to the volatility of the broader markets. In this context, the underlying policies and best practices related to data that is contributed to NCREIF, which underpins the Index, have also changed and are continuing to evolve.

In “The NCREIF Index: A Current Perspective”, Chung-Hong Fu provides a comprehensive overview of the Index and discusses some of the recent as well as planned changes that will impact the Index.

Tom Johnson: Managing Director

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An investor’s goal for any asset class is to determine what type of exposure is appropriate given risk and return objectives. Traditionally, style classifications help investors set expectations about how a particular manager or strategy will perform in a given market environment. This determination provides the strategic clarity that is relevant to evaluating prospective managers and to identifying those that, individually or collectively, will be best-suited for meeting the investor’s specific objectives.

Unlike marketable securities such as equities and fixed income, style classifications for timberland investments have proven elusive. In “Timberland Investment Styles: What They Mean for an Investor” Tom Johnson, Managing Director, identifies four distinctive investment styles that are prevalent within the timberland asset class and discusses the relationship between styles and other distinguishing manager characteristics such as: approach to asset allocation, market and transaction size focus, as well as the business model adopted – how they may interrelate and impact diversification as well as impact performance.

Chung-Hong Fu: Managing Director Economic Research and Analysis

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As we head into 2010, what has struck many investment professionals about the recession we have witnessed is how broad and deep the correction has been. Virtually no asset class has been unscathed. In this context, many look to the NCREIF timberland index and note that it appears that the timberland asset class has not been severely impacted by the current correction. What could explain this performance result in the face of the economic headwinds that we have witnessed?

In “Has the Other Shoe Dropped? Assessment of a Market Correction in Timberland Markets”, Chung-Hong Fu explains the relationship between the observed and actual performance of the asset class and discusses what this relationship means for investors.

Chung-Hong Fu: Managing Director Economic Research and Analysis

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Markets for ecosytem services encompass 1) carbon credits; 2) conservation easements; 3) mitigation banking; and 4) recreational leasing. As demographics and public policy continue to shift, timberland bundle of rights which include these option values are growing in importance.

In “Making Trees Greener: Opportunities in Ecosystem Services for Timberland Investors”, Chung-Hong Fu explores the four areas that encompass ecosystem services, discusses the current as well as future economic importance of this facet of timberland investing, and examines ways to capitalize on these opportunities within a timberland investment portfolio.

Chung-Hong Fu: Managing Director Economic Research and Analysis

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Institutional investors and even some managers will try to link biological characteristics of timber to fundamental investment characteristics such as risk, return, and investment term. How appropriate are these linkages though? Does investing in more mature timber actually lower the risk of timberland investing? Does the fact that some species of timber in the Southern Hemisphere are fast growing improve investment performance?

In “Relevance of Timber Age and Growth Rates on Timberland Investment Performance”, Chung-Hong Fu examines these relationships and for many in the investment community, finally separates myth from reality.

Chung-Hong Fu: Managing Director Economic Research and Analysis

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Wood bioenergy is taking center stage in the discussion on climate change and alternative fuels though little is reported in the popular media. According to some estimates, US wood demand will nearly double by 2023, and up to 40 percent of this increase will be attributable to bioenergy.

In “A Timberland Investor’s Primer to Bioenergy Opportunities”, Chung-Hong Fu introduces the range of bioenergy applications for woody biomass, the policies that are driving the increased demand, and the underlying economics and scientific advances that are providing increased opportunities for timberland investors.

Chung-Hong Fu: Managing Director Economic Research and Analysis

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During its early history, timberland investing was dominated by US institutions investing primarily in U.S. timberland. As the asset class matured, Americans began to expand their scope of investment opportunities to include regions outside the US. Today, the investor base has broadened further with many institutional European investors investigating and making their first commitments to institutional timberland. Europeans often have a different point of view regarding cross border investing than their American counterparts and must consider unique challenges of making these investments, such as the US’ Foreign Investment Real Property Tax Act (1980) (FIRPTA).

In “Addressing the European Perspective: US Timberland in a Global Timberland Allocation”, Chung-Hong Fu discusses these unique challenges and tackles the many, oftentimes conflicting perceptions that surface when Europeans consider investing in timberland, specifically US timberland.

Chung-Hong Fu: Managing Director Economic Research and Analysis

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In the midst of the current financial crisis and in a climate of
deteriorating returns, only a small handful of investment categories have maintained positive performance. How has timberland fared in the
wake of this turmoil? More importantly, how will it perform over the coming months as we continue to weather the storm and await brighter
economic news?

These are the questions that Chung-Hong Fu tackles in his latest white paper, Timberland in the Eye of the Storm: The Short and Long-Term Outlook for Timberland in Today’s Economic Environment.

Chung-Hong Fu: Managing Director Economic Research and Analysis

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In 2004, Chung-Hong Fu, TIR’s Director of Economic Research and Analysis, wrote what is still the most comprehensive and complete paper examining whether timberland could be considered as a hedge against inflation. Dr. Fu has updated that original paper to include more current data and has re-released this paper, “Timberland as an Inflation Hedge”.

Chung-Hong Fu: Managing Director Economic Research and Analysis

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The size of the global timberland investment market has historically been difficult to determine because of the private nature of timberland transactions and the lack of reliable, public data. On a regular basis though, the relative size of the marketplace has been used by investors, their advisors and managers as an argument for or against the viability of the asset class, different investment regions or particular investment strategies.

In this paper, a component based methodology is used to answer the elusive question “What is the size of the global timberland investment marketplace?”. Three main markets are identified: the Established, the Broad and the Emerging Markets, along with the estimated market value of each category. In addition, market size estimates are provided for the countries and regions that comprise each segment.