Institutional investors' perspective on risk in New Zealand forestry.

Authors: A. Wiltshire
Publication: New Zealand Journal of Forestry, Volume N.Z.J.For. 2000, Issue N.Z.J.For. 45(2) 2000, pp 13-15, Aug 2000
Publisher: New Zealand Institute of Forestry

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Abstract: Evidence suggests we are not as good at judging risk as we like to think. But risk exists and so we have to find ways to deal with it. Timberland is an ideal asset class for reducing risk in a balanced investment portfolio. Its popularity is limited by illiquidity and the lack of well developed benchmarks against which investment performance can be measured. Recent historical returns have been very poor in New Zealand. This period has been associated with high volatility of prices in the traded forestry sector. Relatively high risk is expected to continue going forward, driven by market factors of supply and demand and New Zealand's comparative disadvantages. Investors should consider whether assets have now been priced down enough to offer future returns sufficient to offset the expected risk in the sector. New Zealand forests are still very attractive to investors because of country stability, high growth rates, proven plantation technology and the end-use versatility of radiata pine.

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