The outlook for the U.S. economy, and especially the housing sector, is positive, making now an interesting time to evaluate timber investments. Specifically, the upward trajectory of housing started during the Great Financial Crisis, and the fact that a large portion of the population in the U.S. are just reaching home-buying age provide tailwinds for timber over the medium-term.
The outlook for timberland returns varies by geographic region. In general, investments made outside the U.S., particularly in Latin America, offer higher returns than domestic U.S. investments but also involve higher risk due to a range of factors including, but not limited to, exchange rate risk and country-specific political risk.
Institutional interest in timber has waned since the global financial crisis as investors have sought higher returns in other real assets, such as agriculture and infrastructure. However, many sophisticated and longer-term investors see this as a buying opportunity and are exploring the asset class again.
Overall, as financial asset volatility rises, an investment in timber can provide needed diversification and reduce portfolio risk.
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