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MassPRIM timber beats benchmark

The $66bn pension reported timber returns of more than 8% over the past year, outpacing its benchmark NCREIF Timberland Index’s 3.35% growth over the same period.

Timberland investments by the Massachusetts Pension Reserves Investment Management Board (MassPRIM) outperformed the National Committee of Real Estate Investment Fiduciaries Timberland Index over the year ending June 30, according to materials from the Real Estate and Timberland Committee meeting held Wednesday.

MassPRIM’s timberland portfolio produced 8.3 percent returns during that period, according to the materials, which compare those returns with NCREIF’s March Index because June returns were not available in time for the calculation.

In late July, NCREIF released its second quarter findings, reporting Index returns of 3.35 percent over the year ending at the end of June, which means that MassPRIM’s portfolio outperformed the index by 4.95 percent.

MassPRIM’s timberland investments also outperformed the NCRIEF index over the trailing three-, five- and 10-year periods, though by smaller margins of 0.4 percent or less.

In May, the Real Estate and Timberland Committee recommended that MassPRIM replace its timber advisor, the Townsend Group, with Denmark-based International Woodlands Company.

At a February meeting of the Committee (the most recent for which complete meeting materials are publicly available), MassPRIM senior investment officer Timothy Schlitzer recommended the pension maintain its 4 percent target allocation for timber, which he said should provide a degree of inflation protection and long-term risk adjusted returns with low correlation to other asset types.

“PRIM staff continue to be confident in the long-term drivers of timberland returns – biological growth (60 percent of return), land and timber appreciation driven by global population growth, employment, housing formation, and new construction,” he said, according to a summary of his comments within the materials.

As of the end of the second quarter, MassPRIM’s timberland investments were valued at $2.4 billion and held in accounts managed by Forest Investment Associates and Campbell Global.

According to a presentation Schlitzer gave in May, 47.7 percent of the MassPRIM timber portfolio is located in the southern US, with 40.5 percent located in the north-west and smaller portions devoted to timber in the north-east and to international properties.

More than half the portfolio is Southern Pine timber, with 13.8 percent devoted to Douglas-fir and the remainder divided between nine different species.