With timber emerging as an attractive alternative investment, more investors are looking to add timberland to their portfolios. Choosing the right timber investment management organization (TIMO) to partner with is critical to maximizing returns. TIMOs manage acquisition, management and disposition of timberland on behalf of institutional investors like pension funds and endowments. When evaluating TIMOs, key factors to consider include track record, expertise, transparency, alignment of interests and responsiveness. The top-performing TIMOs have strong networks for sourcing deals, excellent forestry and financial management capabilities, and a solid reputation. Leading firms like The Campbell Group, Forest Investment Associates and Timberland Investment Resources have delivered strong risk-adjusted returns over decades by leveraging economies of scale while catering to investor goals. Partnering with an established, reputable TIMO can provide efficient access to a compelling asset class.
Evaluate investment track record over full market cycles
The starting point in selecting a timber investment manager is to analyze their historical performance across both up and down markets. The top TIMOs have navigated recessions, periods of high inflation and logging restrictions while still generating consistent positive returns for their investors. For example, The Campbell Group has delivered a 16%+ internal rate of return for over 30 years through disciplined acquisition strategies and intensive forest management. Benchmarking TIMOs against public timber REITs can also provide useful insights. The most skilled managers have been able to consistently outperform public benchmarks on a risk-adjusted basis over long time horizons by actively managing and improving forestlands.
Look for deep timberland expertise and rigorous processes
Reputable TIMOs boast robust teams spanning forestry, finance, acquisitions and client service. For instance, Forest Investment Associates employs over 60 foresters and land management professionals to maximize productivity of each timberland asset through silvicultural enhancements and harvesting oversight. The best TIMOs also implement disciplined investment processes including proprietary modeling, due diligence procedures and risk management controls. Hancock Natural Resource Group, for example, performs sophisticated cashflow modeling to optimize harvest scheduling and road building. Strong expertise and analytical capabilities enable top TIMOs to acquire undermanaged forests and create value through productivity improvements.
Ensure alignment of interests and fee transparency
The incentives of the TIMO should be aligned with those of the investor. Many leading firms demonstrate alignment by co-investing their own capital in funds alongside clients. Timberland Investment Resources offers investors transparency into all costs including annual asset management fees scaled by fund size. Investors should look for fair fee structures based on performance rather than excessive overhead costs. There should also be clear disclosures concerning downstream affiliates that could lead to potential conflicts of interest. Top TIMOs provide accountability through timely and audited financial reporting.
Evaluate responsiveness and reporting capabilities
TIMOs must provide superior client service and customized reporting to help investors monitor their timberland investments. The best TIMOs have online client portals with real-time data on harvest activity, inventory levels and fund financials. Timberland Investment Resources issues quarterly timber market reports and hosts annual on-site inspections of properties. Investors should seek managers who proactively communicate, address inquiries promptly and adapt strategies based on investor input and changing conditions. A focus on client objectives helps leading TIMOs deliver tailored solutions.
In summary, partnering with a top timber investment manager requires evaluating track record, expertise, alignment of interests, transparency and client service. Selecting an established TIMO with a proven process can provide efficient access to timberland investment returns.