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Benefits of Timberland
 
An increased emphasis on portfolio diversification has led many investors to focus on specialized investments. Such investments do not look or act like traditional portfolio assets, and this difference is what makes them attractive. Timberland is such an asset.
 
 
Diversification/Risk Reduction
 
Asset managers are aware of the need for diversification among multiple assets that respond differently to economic events. Timberland provides such diversification for the overall portfolio. Timberland returns, for more than thirty years, have been negatively correlated with the returns from both equity and fixed income assets. In addition, timberland provides diversification within the real estate segment of a portfolio because returns have a low correlation with the returns from conventional real estate.
 
 
Competitive Returns
 
Strong returns allow timberland investments to meet portfolio diversification needs while enhancing overall portfolio performance. For more than three decades timberland has been very competitive with stock market returns and has out-performed both fixed income and conventional real estate.
 
 
Biological Growth
 
A unique feature of timberland investments is biological growth. Unique because growth is highly predictable. Unique because growth is immune to economic events or market fluctuations. The importance of biological growth is magnified by the fact that, as trees grow and become larger, their value increases much faster than their size. Larger trees can be used to make higher-valued products.
 
 
Real Rate of Return
 
An investment in timberland is an investment in a "hard asset" and provides substantial protection from inflation. Although lower inflation in recent years has turned many investors away from real assets, astute investors have seized the opportunity, while such assets are out of favor, to take advantage of favorable buying opportunities. Even in sustained periods of low inflation, timberland has provided very competitive returns.
 
 
The Future of Timber
 
The outlook for timberland investors is attractive. Supplies are decreasing, demand is increasing and prices are expected to continue to appreciate in real terms. Declining supplies are a result of competing uses for forestland, a lack of reforestation and public pressure to curtail timber harvest on federal lands. Higher demand for timber results from an expanding global market for wood products and a shifting emphasis to renewable resources. Increasing global demand for forest products is expected to continue due to worldwide demographic trends.
 

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