Timberland
Timberland is forest land owned as an investment. Its return comes from the biological growth of the trees, movements in timber prices and the value of the land, and increasingly from carbon credits and conservation payments.
Also called: timberland investment · forestry investment · timber investment · forest asset · TIMO
What sets timberland apart from other real assets is that the asset grows. Trees add volume every year whether markets rise or fall, and as they thicken they move into higher-value product classes, from pulpwood to sawtimber. An owner who dislikes current prices can simply leave the trees standing, which stores the value and adds to it. That option to wait is a large part of the appeal.
Institutional ownership took off in the 1980s, when forest-products companies sold their land to pension funds and endowments, often through specialist managers known as timberland investment management organisations. Returns have historically shown low correlation with shares and bonds and some protection against inflation, which is why very wealthy families and family offices hold forests across generations.
The drawbacks are real. Timberland is illiquid and slow to value, and it is exposed to fire, storms, pests and changes in land-use or carbon policy. Published return indices are based on appraisals, which smooth out volatility. Income from carbon markets depends on rules that are still changing.
In practice
This entry describes an asset class and is not investment advice. Past index returns for appraised assets understate risk.
See also
- Family OfficeA family office is a private organisation that manages the wealth and affairs of one very wealthy family, or of several. It handles investments, tax, estate planning, philanthropy and administration, and is controlled by the family it serves.
- Real-World AssetA real-world asset, in crypto usage, is a claim on something that exists off-chain — a Treasury bill, a property, an invoice, a fund unit — represented by a token. The token is a record of the claim; whether the claim is any good is a legal question the blockchain cannot answer.
- TokenizationTokenization means representing an asset, or a claim on one, as a transferable token recorded on a ledger. The token is a record of entitlement; whether legal ownership of the underlying asset moves with it depends on the contract and the governing law, not on the ledger.
- Source of WealthSource of wealth is the evidenced account of how a customer accumulated their overall assets — the business they built, the inheritance, the years of earnings — as distinct from the origin of the particular money moving through one transaction.
- Escrow AccountAn escrow account holds funds with a neutral third party until conditions both sides agreed to are met, at which point the money is released to whichever side the conditions point to. Neither party can move it unilaterally while it sits there.