Who Are The Best Investment Managers for Farmland?

Timberland investors are used to predictable stable cashflows. But 2022 has introduced significant volatility into the asset class. Not surprisingly, driving this volatility on the supply side are heightened energy, fertiliser and transport costs. And as a recession takes hold, softening demand may further impact cash returns.

Nevertheless, timberland remains high on the agenda with specific institutional investors. The shift in portfolios towards sustainable products, and the long term structural trends of renewable energy and net zero portfolios are keeping the traffic on timber research papers inside RFPnetworks high.

Farmland and Timberland investing are checking lots of institutional investor boxes at the moment. And whilst investing in these real asset classes has some similarities with more familiar real estate and infrastructure funds, trees and crops require a different level of due diligence. Knowledge of which, investors are growing using our Real Assets feed. With noticeable interest by European Investors in exposure to the U.S. markets.

Read the latest insights from Farmland and Timberland investment managers inside RFPnetworks.

Farmland and Timberland investing are checking lots of institutional investor boxes at the moment. And whilst investing in these real asset classes has some similarities with more familiar real estate and infrastructure funds, trees and crops require a different level of due diligence. Knowledge of which, investors are growing using our Real Assets feed. With noticeable interest by European Investors in exposure to the U.S. markets.

But what are the inflation protection properties of land based asset classes? Logically, one would assume that correlations between CPI and cash yields from Farmland and Timberland should be high. The goods they produce form important constituents of the CPI basket. But sensitivities and the inflation hedge lag will differ between row & permanent crops, lumber and pulp.

And how does historical performance compare to real estate, infrastructure, equities and bonds. The answer to this question only tells part of the story. The real question today is whether de-globalisation and politically renewed interest in food security will drive better performance going forward?

But it's not all about performance and income: Farmland & Timberlands low or negative CO2 emissions per USD invested, add to the trend amongst European Investors to move towards a net-zero portfolio.

And equally important, in a world where bond-equity correlations have increased, is there a free lunch available in the form of diversification?

Today, ownership of Farmland and Timberland by institutional investors is tiny. Tomorrow, that may change.

With ESG considerations, net-zero portfolios and commodities high on professional investors agenda, investments in natural capital are becoming a natural fit for portfolios.

Farmland and Timberland are examples of a wide range of Natural Capital Investments that are becoming popular, for their low net CO2 emmissions per invested dollar, versus traditional asset classes.

But how do you measure the impact of Natural Capital on the local environment and communities? And how has the market for trading carbon offset credits developed? And what management practices are being deployed to reverse soil degradation, and deforestation? The grass is not always greener, as many asset managers are finding out.