Timberland earns a position in many institutional investors’ portfolios because of its portfolio-level benefits – a lack of correlation with capital markets, ability to hedge inflation, and steady income return. For some investors, portfolio decarbonization is an increasingly important portfolio benefit that also comes from an allocation to timberland. In all cases, the benefits that timberland can bring to a portfolio depend critically on the scale of the allocation and investment selection – and these are decisions that can only be made with a clear understanding of the investable universe. The expanse of the investable universe determines both the set of possible investment strategies and investment scale.
Timberland investment decisions and portfolio design are a function of many factors but perhaps most fundamental is an understanding of the investable universe. In this paper we describe the institutional investment universe for timberland and estimate its current size. Next, we characterize the major investment geographies that make up the universe and discuss changes observed over the past decade. We then examine market drivers creating opportunities for expansion of the investable universe. Finally, we conclude with key takeaways for both new and existing timberland investors.