Investors discover diversification in the woods

For decades, some university endowments, pension funds and other big investors have put part of their money to work in the woods. They’ve bought large tracts of timberland, viewing them as an asset class separate from stocks, bonds and other forms of real estate.

Jeremy Grantham, co-founder and chief investment strategist at GMO, the asset manager based in Boston, calls timber "a perfect investment" for someone with a time horizon of, say, 20 years or more.

"Timber is safer than stocks but not quite as safe as Treasury inflation-protected bonds," he said. "And as long as the sun shines and the rain rains, trees grow."

Timber also acts as an inflation hedge.

"If you look at commodities, you find a pattern that all of them, except timber, had a declining real price up until 10 years ago," Grantham said. "But standing timber has a long-term record of modestly rising prices."

Tim Gray, New York Times

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