News & Analysis

Timberland secondaries market still in infancy

Timberland secondaries are a small but growing part of the $100 billion timberland market, according to the head of a forestry investment firm.

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The secondaries market for timberland fund stakes is a small but growing part of forestry investments, according to New Forests CEO David Brand.

“The total market is turning over $4 billion to $5 billion in assets worldwide per annum,” Brand told Secondaries Investor. “Most of these would be direct transactions of assets, but some proportion is secondaries transactions.”

With the timberland investment market worth around $100 billion globally, the vast majority of the $4 billion to $5 billion secondary market involves direct transactions of assets. Within this, the size of the secondaries market for timberland fund stakes is in the hundreds of millions, Brand said.

Last year, Canada’s Public Sector Pension Investment Board increased its stake in Kaingaroa Timberlands by purchasing timberland from Harvard Management Company, manager of the US university’s $36.4 billion endowment fund, according to Brand. Kaingaroa manages the Kaingaroa Forest on New Zealand’s North Island.

Asian demand for products made out of timber such as paper in China and diapers in Indonesia could see the global demand for timber triple within 20 years, and this will fuel a growing secondaries market for timberland fund stakes, Brand explained. China in particular has become a central driver of timber demand and energy wood pellet trade has emerged as a significant new market.

“With the huge movement of people in countries like China from rural to urban lifestyles, demand for timber products will continue to grow and investors will continue to seek exposure to particular markets, including by investing in secondaries,” Brand said.

Founded in 2005, Sydney-based New Forests manages sustainable real assets, including forestry, land management and conservation strategies. The firm has over A$2.5 billion ($1.9 billion; €1.7 billion) in assets under management.

The firm has four funds and closed its latest Australia New Zealand Forest Fund 2 at A$707 million in 2014 above its A$500 million target.