North Dakota Retirement and Investment Office has lowered its timber allocation and could divest entirely from the sector in the next seven years, according to the fund administrator’s executive director and chief investment officer David Hunter.
“Technically our timber allocation was 5 percent [around 2010] and it has been reduced to 3 percent,” he told Agri Investor, adding the current portfolio stands at a little over 3 percent. The institutional investor has not committed any new capital to the sector since 2011, when it began “naturally liquidating” its holdings as investments expired.
The fund administrator will focus instead on real estate and infrastructure, although timber will remain on NDRIO’s books for at least the next five to seven years, Hunter said.
NDRIO have been investing in timber through timberland investment management organisation Timberland Investment Resources for 14 years, according to documents by the fund administrator. Its investments, located in the south-east, have outperformed the National Council of Real Estate Investment Fiduciaries index for the last 14 years.
“We like timber, but just not as much as real estate and infrastructure,” he said, explaining that the time it took to invest in timber is “just very long, having about a 20-year cycle”.
“We believe we can get comparable, if not better, risk-adjusted return results from infrastructure and real estate,” said Hunter.
“Timber is a unique asset class and a great diversifier, but it is not as developed from an institutional perspective and when it is sub-5 percent on your portfolio it doesn’t really move the needle. We invested back in 2001 or so when timber was quite a new asset class and there was a little more diversity in the managers in the industry. But infrastructure and real estate have a larger market.”
Hunter said infrastructure’s allocation would grow to between 5 and 7 percent.
The North Dakota Retirement and Investment Office was established in 1989 to coordinate the activities of the $8.57 billion State Investment Board and the $2.06 billion Teachers’ Fund for Retirement.