Why is timber a desirable asset class?
A. Timber is a desirable asset class for several reasons. First, timberland has historically generated excellent returns. Second, timberland historically has a low correlation with other major asset classes, therefore, providing portfolio diversification. Third, timberland returns have been positively correlated to the rate of inflation, which creates a hedge for the portfolio. Finally, including timberland in a diversified portfolio can increase total return at commensurate levels of risk, also known as achieving a more “efficient frontier”.
