Timberland Investment
93.8K views | +1 today
Follow
Timberland Investment
Timber Industry | Deals & Transactions | Investment Rationale | Financial Performance | Investors | Asset Managers
Curated by Sam Radcliffe
Your new post is loading...
Your new post is loading...
Scooped by Sam Radcliffe
Scoop.it!

CalPERS to create 13% real assets allocation and replace benchmark

CalPERS to create 13% real assets allocation and replace benchmark | Timberland Investment | Scoop.it

The California Public Employees’ Retirement System (CalPERS) is planning to consolidate its real estate, infrastructure and forestry investments into a single 13% real assets allocation.

 

The $316bn (€298bn) pension fund is also to adopt a single MSCI benchmark for real assets, replacing the National Council of Real Estate Investment Fiduciaries (NCREIF) Open-Ended Core Equity (ODCE) index, according to board meeting documents.

 

The changes, to be considered at its investment committee meeting next week, build on efforts to harmonise CalPERS’s real asset investments.

 

Paul Mouchakkaa, managing investment director for real assets, will argue that the new allocation and benchmark will enable CalPERS to underwrite real estate, infrastructure and forestry investments while seeking simliar underlying investment characteristics.

more...
No comment yet.
Scooped by Sam Radcliffe
Scoop.it!

Here's Why Calpers Suffered Worst Year Since Financial Crisis

Here's Why Calpers Suffered Worst Year Since Financial Crisis | Timberland Investment | Scoop.it

The California Public Employees’ Retirement System, the largest U.S. public pension fund, earned a return of 0.6 percent on its investments last fiscal year, trailing its long-term target as holdings in stocks and forestland lost money.

 

The pension’s public equity portfolio lost 3.4 percent in the year through June 30 and forestland assets declined 9.6 percent, Chief Investment Officer Ted Eliopoulos said Monday. Fixed-income holdings rose 9.3 percent and infrastructure investments gained 9 percent.
***
The system had $295 billion as of June 30 and $302 billion on Monday, according to a Calpers statement. Stocks made up about 52 percent of the system’s assets as of last month, accounting for their large impact on returns. Fixed-income, such as bonds, totaled 20 percent. Real assets, including real estate, forestland and infrastructure, comprised 11 percent. Private equity was 9 percent. Investments with inflation protection, such as swaps and commodity futures, were 6 percent of the portfolio and had negative returns of 3.6 percent in the year.

more...
No comment yet.
Scooped by Sam Radcliffe
Scoop.it!

CalPERS' underperforming forestland portfolio could be on chopping block

CalPERS' underperforming forestland portfolio could be on chopping block | Timberland Investment | Scoop.it

A strategic review of CalPERS' real assets program slated for the spring could mean a decision on whether the pension fund's forestland portfolio will be eliminated. Andrew Junkin, president of Wilshire Consulting, said in a memo contained in agenda materials for the pension fund's Dec. 14 investment committee meeting that investment staff members are expected to express their view at that review as to how the program “should best progress in the context of the total fund portfolio.” Wilshire Consulting is CalPERS' general investment consultant.


Mr. Junkin said the current $2.2 billion forestland portfolio, which represents less than 1% of total assets, is “not sufficient to meaningfully affect the performance characteristics of the total fund.” The California Public Employees' Retirement System, Sacramento, has $293.6 billion in total assets.


“Moving to a 5% target, which would be meaningful, would require tens of billions of dollars of transactions and would likely take years to accomplish,” Mr. Junkin said in the memo. “Staff continues to assess the efficacy of the program in light of these constraints.”


The program has underperformed its benchmark, the NCREIF Timberland index. For the five years ended June 30, the forestland program returned an annualized 1.1%, 727 basis points below the benchmark.

Mr. Junkin said there are several structural issues with the portfolio, including a lack of regional exposure to the U.S. Northeast and Pacific Northwest markets. CalPERS' U.S. portfolio is concentrated in the Southeast. Timber prices in the Southeast have trended flat recently while Northeastern and Northwestern prices have experienced upticks, Mr. Junkin said.


CalPERS also owns forestland in the Latin American and Asia-Pacific markets. Any decision to eliminate the forestland portfolio would have to be approved by the investment committee.

more...
No comment yet.
Scooped by Sam Radcliffe
Scoop.it!

Global Forest Partners Alleges $9 Million Theft

Global Forest Partners Alleges $9 Million Theft | Timberland Investment | Scoop.it

***
A criminal complaint filed under seal in U.S. District Court in Concord in December and unsealed Oct. 15 charges Roberto Montano, aka Jorge Roberto Montano Pellegrini, with wire fraud. The civil lawsuit, filed by Lebanon-based Global Forest Partners and an affiliate of the California Public Employees Retirement System, alleges that Montano, 49, California biofuels developer Kirk Haney, and companies they control are guilty of breach of contract, theft, fraud and other violations of the law.
***
Global Forest Partners manages an investment portfolio that is nearly as valuable as Dartmouth College’s endowment and includes about 2 million acres of timberland in Australia, Brazil, Cambodia, Chile, Colombia, Guatemala, New Zealand, Uruguay and the southeastern United States. Global Forest has 24 professional employees.
***
By the beginning of this decade, Global Forest had amassed more than $3 billion in assets. That made it a big player in an often overlooked corner of the investment market that TimberLink, a consulting firm, estimated in 2011 comprised about $30 billion in assets.
***
In 2007, according to an affidavit filed in court by an FBI agent, Global Forest began investing “about $45 million to $50 million” from a large pension plan to develop teak plantations in the Peten region of Guatemala.

The investor was the California Public Employees Retirement System, or Calpers, which has more than $300 billion in assets. Calpers participated using Sylvanus LLC, an affiliate with nearly $500 million invested in forest land. A Calpers spokesman confirmed the giant pension fund’s ownership interest in Sylvanus, but referred other questions to Global Forest.
***
Eventually, Calpers provided most of the $45 million to $50 million that was used to pay for land, supplies, equipment and labor needed to plant, maintain and harvest teak trees on a new plantation, according to the FBI affidavit, which describes but doesn’t name the giant pension fund. In 2010, investors organized by Global Forest began forking over $25 million more to fund a second plantation.

The plantations aimed to capture a slice of the global market for teak which, according to a 2012 report from the United Nations Food and Agriculture Organization, is one of “the tropical hardwoods most in demand for the luxury market and heavy duty applications.” While natural teak forests are found only in India, Laos, Myanmar and Thailand, more than 75 percent of the global supply comes from plantations.

The Guatemalan teak plantations that were financed by Calpers and other investors who ponied up tens of millions of dollars — at least $70 million, according to the FBI affidavit — covered as many as 25,000 acres. The U.N. Food and Agriculture Organization estimated that in 1998 Guatemala had had only about 4,000 acres of teak.

Montano played a key role, according to court filings. He “held himself out as the chief executive officer” of Green Millennium, the company that Global Forest and its investors hired to manage the Guatemalan project, according to the affidavit.

Montano opened multiple spigots to boost his illicit personal cash flow, according to the affidavit, which alleges that he pocketed $2.6 million in operating funds, $1.4 million in subsidies from the Guatemalan government and at least $5.3 million in proceeds from loans that improperly mortgaged properties owned by Global Forest investors.
***
Montano is also a defendant in a civil lawsuit filed in Grafton Superior Court in November by Global Forest, Sylvanus and other investors seeking to recover more than $10 million that was allegedly stolen. The lawsuit also names Haney, a San Diego investor and entrepreneur, as a defendant. Haney and Montano were the co-owners of Green Millennium, the lawsuit says.

more...
No comment yet.
Scooped by Sam Radcliffe
Scoop.it!

Calpers to Cut External Money Managers by Half

Calpers to Cut External Money Managers by Half | Timberland Investment | Scoop.it
Only the group that invests in timber and infrastructure projects like roadways is expected to rise, from about six managers to 10. Some 15 slots will go to upstart firms that Calpers plans to identify over the next several years.
more...
No comment yet.
Scooped by Sam Radcliffe
Scoop.it!

Calpers Reviews Its Timber Holdings

Calpers Reviews Its Timber Holdings | Timberland Investment | Scoop.it
The California Public Employees Retirement System is reviewing its timber holdings following a period of poor performance and questions about whether the investments are large enough to impact overall returns for the nation’s largest public pension fund.

Top investment officers and consultants to the system known by its abbreviation Calpers discussed the $2.3 billion commitment at a board meeting Monday. One consultant, Wilshire Associates managing director Andrew Junkin, hinted at the review in an Oct. 22 letter to Calpers investment committee chair Henry Jones that cited the portfolio’s “structural weaknesses” and an evaluation of its “efficacy.”

A Calpers spokesman said no decisions have been made about the future of the timber portfolio. “This process has just begun,” he said via email.

Forests valued for their timber are Calpers’ worst-performing asset since the financial crisis, with returns down .8% over the last five years and 1% over the past three years. The portfolio gained 2.5% during the 2014 fiscal year but that was well below internal goals and industry averages.

Calpers is one of the largest holders of timber in the U.S. and owns 1.46 million acres, according to Forisk Consulting LLC. But one problem identified by Mr. Junkin is that these holdings are entirely concentrated in one part of the country — the U.S. Southeast. Outside the U.S. Calpers also owns properties in Brazil, Guatemala and Australia. The forests are also struggling due to the “timing of the original purchases,” according to the letter.

The size of the program presents another challenge. The holdings represent roughly 1% of total assets at Calpers, which were $296.4 billion as of Nov. 13.

“It could be argued” the current allocation “is not large enough to have a significant impact,” Mr. Junkin said in his letter. At the same time, “it would be massive challenge” to increase the size of the timberland holdings “to something more impactful, say 5%.”
more...
No comment yet.
Scooped by Sam Radcliffe
Scoop.it!

CalPERS earns 4.9% on timber in 2013

Sam Radcliffe's insight:

The retirement fund missed its timberland benchmark (NCREIF) by quite a bit.

more...
No comment yet.
Scooped by Sam Radcliffe
Scoop.it!

CalPERS infrastructure outperforming benchmark over the long term, while forestland trails

CalPERS infrastructure outperforming benchmark over the long term, while forestland trails | Timberland Investment | Scoop.it

CalPERS’ annual review of its infrastructure and forestland programs shows the fund’s infrastructure program has outperformed its benchmark by 130 basis points annually since the program’s inception, while its forestland investments trailed the NCREIF Timberland index by 380 basis points from its inception.


Through March 31, the latest returns available, CalPERS’ infrastructure investments returned 8.1% annually from inception, 13.9% over five years, 17.6% over three years and 5.7% over the one-year time frame. In each period, returns were above the benchmark of CPI plus 400 basis points.


Annualized forestland returns of 0.6% (from inception), -1.1% (five years), -2.5% (three years) and 6.5% (one year) trailed the NCREIF Timberland index in each period.

more...
No comment yet.
Scooped by Sam Radcliffe
Scoop.it!

CalPERS, UC Davis launch research initiative to study impact of sustainability factors on investments

CalPERS, UC Davis launch research initiative to study impact of sustainability factors on investments | Timberland Investment | Scoop.it

The California Public Employees’ Retirement System (CalPERS) today launched, in partnership with University of California, Davis, the Sustainable Investment Research Initiative (SIRI). The initiative is an effort to drive innovative thought leadership that will inform and advance the organization’s understanding of sustainability factors and the impact they have on financial performance.


Today’s launch also marked the start of a Call for Working Papers from scholars and investment practitioners globally in the fields of finance, economics, accounting, law and business. The papers will contribute to a rigorous debate and discussion on the impact of environmental, social, and governance (ESG) issues on long-term value creation and capital market stability.

***

In 2011, the CalPERS Board approved integrating ESG issues as a strategic priority across its investment portfolio. It is grounded in the three forms of economic capital – financial, human and physical – that are needed for long-term value creation, according to the pension fund’s 2012 report, “Towards Sustainable Investment.” SIRI will provide independent evaluation and insight for CalPERS sustainability strategy, as well as contribute to the larger debate.



more...
No comment yet.
Scooped by Sam Radcliffe
Scoop.it!

CalPERS eyes expanding timber portfolio's U.S. reach

CalPERS eyes expanding timber portfolio's U.S. reach | Timberland Investment | Scoop.it

CalPERS' investment consultant is recommending that the $234.3 billion retirement system broaden its timberland program beyond the southern U.S. to other parts of the country.

more...
No comment yet.
Scooped by Sam Radcliffe
Scoop.it!

CalPERS still evaluating forestland portfolio, asset allocation review scheduled for 2017

CalPERS still evaluating forestland portfolio, asset allocation review scheduled for 2017 | Timberland Investment | Scoop.it

CalPERS’ forestland portfolio continues to be under evaluation following years of underperformance, but a decision on whether to keep investing in the asset class will have to wait until an asset allocation review is completed next year. The $1.9 billion forestland portfolio remained the worst-performing asset class in the latest fiscal year, showed a review of the program, with a -9.6% return in the 12 months ended June 30, and -2.6% in both the three- and five-year periods.

 

Those results for one of CalPERS’ newest investment sectors are below the pension fund’s forestland benchmark of 2.9% for the one-year period, 7.7% for the three-year period and 6.6% for the five-year period.
***
Paul Mouchakkaa, CalPERS managing director, real assets, would only say to the investment committee on Monday that the program’s role would be explored during an asset allocation review of CalPERS entire portfolio, which is scheduled to take place throughout 2017. He did not go into details.

 

But Andrew Junkin, president of Wilshire Consulting, told the investment committee that the current size of the program is not “sufficient” to meaningfully affect the performance characteristics of the total fund.
***
Wilshire serves as CalPERS general investment consultant and specifically as the consultant to the forestland program.

 

In deciding to end the hedge fund program in September 2014, CalPERS officials also made a scale argument, arguing that the $4 billion program was too small to make a difference, and that expansion would be unwise, given the difficulty of developing a large, high-return program.

 

The Wilshire forestland review found the program has underperformed because it is highly levered and that much of the forestland is in the Southeast U.S. instead of being diversified to include the Northeast and the Pacific Northwest.

more...
No comment yet.
Scooped by Sam Radcliffe
Scoop.it!

CalPERS creates 'harmonised' real assets strategy

CalPERS creates 'harmonised' real assets strategy | Timberland Investment | Scoop.it

The California Public Employees’ Retirement System (CalPERS) has established a ‘harmonised’ real assets strategic plan for the next five years. The $293bn (€259bn) pension fund said the plan largely continues the investment goals and parameters of its existing real estate, infrastructure and forestland programmes, but increases harmonisation while reducing risk and complexity.

 

“The unifying elements of this strategic plan will make the asset class less complex to manage, and make reporting more transparent,” said Paul Mouchakkaa, managing investment director for real assets.
***
The plan also outlines ESG integration goals for the next five years, including manager expectations, risk assessment, and research.

 

Real assets benchmarks, the role of the fund’s forestland programme and real assets allocation will be examined next year.

more...
No comment yet.
Scooped by Sam Radcliffe
Scoop.it!

Molpus Woodlands Group acquires 192,000 acres of timberland in Louisiana

Molpus Woodlands Group acquires 192,000 acres of timberland in Louisiana | Timberland Investment | Scoop.it

The Molpus Woodlands Group, LLC (Molpus), a timberland investment management organization headquartered in Jackson, Mississippi, announced today, on behalf of a client, the successful purchase of approximately 192,000 acres of timberland and a timber lease in southwest Louisiana.


The timberland, located in six counties between the cities of Lake Charles, Louisiana to the south and Alexandria, Louisiana to the north, is a primarily southern pine plantation property that has been in timber production for decades. The timberland is located in a vibrant sawtimber and pulpwood market area and it provides raw material to forest products customers in a variety of domestic market segments. Molpus currently maintains offices in Bossier City, DeRidder and Monroe, Louisiana to oversee the management of an additional 207,000 acres in this state.


Sam Radcliffe's insight:

This appears to be the CalPERS holdings managed by Campbell Global.

more...
No comment yet.
Scooped by Sam Radcliffe
Scoop.it!

Calpers Misses Target With 2.4% Return in Past Fiscal Year

Calpers Misses Target With 2.4% Return in Past Fiscal Year | Timberland Investment | Scoop.it

The California Public Employees’ Retirement System, the largest pension in the U.S., said it earned 2.4 percent last fiscal year, below its target rate as financial-market turbulence depressed stock and bond returns. The $300 billion fund earned 1 percent on public-equity holdings and 1.3 percent in fixed-income investments, said Ted Eliopoulos, chief investment officer. Real estate returned 13.5 percent, while private equity gained 8.9 percent.

***
Calpers said it has earned 10.9 percent over a three-year period and 10.7 percent over five years. Its real-estate and private-equity returns lag by a quarter.
***
Eliopoulos said Calpers is reviewing its $2.2 billion it has invested in forestland and timber after losing 0.3 percent in the fiscal year, more than 1,000 basis points below its benchmark. He called the loss a “rather dramatic underperformance.” Pensions invest in forestland to generate long-term, stable income and to hedge against inflation.

more...
No comment yet.
Scooped by Sam Radcliffe
Scoop.it!

Calpers Puts Portion of Timber Holdings Up for Sale

Calpers Puts Portion of Timber Holdings Up for Sale | Timberland Investment | Scoop.it

The California Public Employees’ Retirement System, or Calpers, is seeking buyers for roughly 300,000 acres of forestry largely in Louisiana amid a broader review of its timber holdings, according to people familiar with the matter. The woodland represents about one-fifth of roughly 1.3 million U.S. acres controlled by the Sacramento-based fund.

***
A decision to sell the Louisiana assets follows an announcement last September that Calpers would exit from a $4 billion investment in hedge funds due to concerns about complexity, costs and whether the commitment was large enough to affect overall returns.


“We continue to look through the entire portfolio to make sure that all programs fit with our current strategic priorities and our efforts to reduce costs and complexity,” a Calpers spokesman said. He added “no decisions have been made,” and there is no deadline for completion of the pension fund’s internal review of forestry holdings.


Any move Calpers makes away from the timber industry will likely influence other investors because of its size and history as an early adopter of alternatives to stocks and bonds.
***
Calpers’s first investments in timber happened in the mid-1980s, but much of its $2.3 billion in forests was purchased when land prices were still high before the last housing bust. Since the financial crisis, timber has been Calpers’s weakest-performing asset, according to a May filing. Forestlands lost 0.4% over the past five years, while Calpers’s overall fund rose 9.4%.
***
Calpers has an additional one million acres in east Texas it may consider selling if the Louisiana sale goes well, one of the people said. Those Louisiana assets could fetch several hundred million dollars, the people said. One of Calpers’s external timber managers, Campbell Group LLC of Portland, Ore., has hired UBS AG to run the sale.


The size of Calpers’s timber holdings is another reason the portfolio is under review. It represents only about 1% of total assets at Calpers, and Mr. Junkin added in his letter to Mr. Jones that “it could be argued” the allocation “is not large enough to have a significant impact” on overall returns.


Nearly 80% of Calpers’s timber holdings are in the U.S., with the rest in Latin America and the Asia Pacific area. One option under consideration for the U.S. timber portfolio is to leave it completely, but there are no immediate plans to sell any portion of the international forestry assets in Latin America and the Asia-Pacific region, according to people familiar with the matter.

Sam Radcliffe's insight:

See Jack Bridge's frank comments at "Risk-Adjusted Returns" http://sco.lt/5dvwmn


What the article doesn't say: the market for large timberland properties is pretty frothy right now, so what better time to sell? As Jack Lutz notes, this will easily be absorbed by the full-of-dry-powder TIMO's, although some may need buying partners if this is offered as a single transaction.


The timber REIT's have been buying back shares because they represent the cheapest timberland they can find. We'll see what they think of this opportunity...

more...
No comment yet.
Scooped by Sam Radcliffe
Scoop.it!

CalPERS approves new asset allocation, ups timberland portion

CalPERS approves new asset allocation, ups timberland portion | Timberland Investment | Scoop.it

CalPERS approved Tuesday night a new three-year asset allocation that maintains the $282.5 billion pension fund’s expected rate of return at 7.5%.

The new target portfolio, which is scheduled to go into effect July 1, reduces the target allocation to global equities to 47% from 50% and private equity to 12% from 14%, while increasing fixed income to 19% from 17% and real estate to 11% from 9%.

***

The allocation for inflation-sensitive securities, including commodities and Treasury inflation-protected securities, will increase to 6% from 4%, while the combined infrastructure and forestland allocation will increase to 3% from 2%. The liquidity asset class, including cash and short-term securities, will decrease to 2% from 4%.

more...
No comment yet.
Scooped by Sam Radcliffe
Scoop.it!

CalPERS pushing on infrastructure, timber

CalPERS pushing on infrastructure, timber | Timberland Investment | Scoop.it

CalPERS is attempting to increase allocations to infrastructure investments and timber, assembling what is believed to be the largest infrastructure investment staff among U.S. pension funds.


For the $277.3 billion, Sacramento-based California Public Employees' Retirement System, expanding investments in both areas is part of a continuing effort to diversify assets, serve as an inflation hedge and provide a cash yield for the pension fund.


The initial infrastructure investments were made after the financial crisis, when executives searched for investments not correlated to plunging stocks and bonds.


CalPERS had purchased and sold some timber assets (which officials of the pension fund call forestland) before the financial crisis, but made new investments as part of the asset diversification effort in 2008. However, CalPERS executives have not made any new forestland investments in five years and instead have put more focus on increasing infrastructure assets.

***

He said his expanded infrastructure team, with expertise in transportation and power projects, is looking at power plants, airports, parking facilities and toll roads as potential investments.


Plans for expansion of the fund's forestland investments are not as advanced. CalPERS has $2.2 billion invested in timber, just two-tenths off its 1% allocation.


While infrastructure has produced overall robust returns — an annualized 18.9% for the three years ended June 30 compared to its custom benchmark of 6.7% — timber has fared poorly, producing an annualized -2.8% vs. 3.6% for the benchmark NCREIF Timberland index during the same period.


Mr. Mullan said the forestland portfolio, almost 80% of which is in the southern part of the U.S., has been severely affected by the downturn in the housing market.


Mr. Mullan said the timber program has been understaffed; until recently, there was only one staffer, working part time on the portfolio. He said an additional, dedicated employee was hired for this month, but acknowledged that might not make an immediate difference because substantial tracts of timber rarely come onto the market.


He said one option he and the new staffer will be exploring over the next year is to expand the timber program to include other investments, such as agricultural, water or other natural resources.


CalPERS is the largest U.S. defined benefit plan and one of the largest institutional investors in the world, making its consultants and executive staff question whether its allocations to infrastructure and timber are too small to make a difference in the fund's overall performance.


“Significantly, it does not really move the needle,” Allan Emkin, managing director of Pension Consulting Alliance, said at a CalPERS investment committee workshop last month. ”You're looking at a basis point in one direction or another and there's resources, there's time, there's oversight; why do it?” PCA is one of CalPERS' investment consultants.


In an interview, Mr. Emkin said he is not against starting small with infrastructure, but said it's not going to be worth it in the long term if CalPERS cannot get its allocation to at least 5%.


Mr. Emkin said he believes the same about timber.


Mr. Mullan said he agrees growth needs to occur in both asset classes. While a new plan needs to be developed for timber, he believes the infrastructure team can grow its assets substantially over the next decade.

Sam Radcliffe's insight:

OK, so timber is only .8% of the portfolio. But it's still $2.2 billion and there has been only one part-timer watching over it?

more...
No comment yet.
Scooped by Sam Radcliffe
Scoop.it!

CalPERS to sell 20,000-acre Sonoma County forest

CalPERS to sell 20,000-acre Sonoma County forest | Timberland Investment | Scoop.it

A national conservation group has reached an agreement to buy nearly 20,000 acres of timberland in northwestern Sonoma County, a move that derails the long-disputed, forest-to-vineyards conversion project pushed by CalPERS, the giant state workers pension plan.


The $24.5 million purchase of the so-called Preservation Ranch, to be completed by the end of May, is led by The Conservation Fund, based in Virginia. It would contribute up to $6 million toward the purchase.

***

The Conservation Fund owns and manages 55,000 acres of forest in Mendocino County and would use the new property for sustainable timber production and possibly for the sale of carbon credits.

The purchase would eliminate the threat of subdivision for rural estates and commercial vineyard development.

more...
No comment yet.
Scooped by Sam Radcliffe
Scoop.it!

CalPERS Timberland Portfolio in the Red for Last Three Years

more...
Jack D Bridges's curator insight, December 12, 2012 9:43 AM

Interesting....maybe if CALPERS stopped out-sourcing every manager decision in its portfolio, they'd save more than a few bps/year. 

 

Sure, running a pool of assets that large isn't easy, but, really? How hard is it to avoid market tops, and allocate during times of dislocation?