Timberland and farmland assets have been used and tracked as components of institutional portfolios for over two decades, establishing a strong historical record of performance, low to moderate risk, and favourable diversification characteristics.
While investors have generally treated timberland and farmland as separate asset classes, both are income generating and land appreciation investments with biological growth components. Both offer comparable risk-adjusted returns and inflation protection. Structuring coordinated investments in these two natural resources has the potential benefits of generating operational efficiencies and augmenting the risk-reducing diversification of a broader portfolio. This article provides a comparison of the risk-return profile of a combined timberland/farmland investment to commercial real estate and other financial assets. Further, we analyse the performance results over the past 25 years for pure timberland investments and pure farmland investments compared to a combined timberland/farmland model portfolio.
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