US-based LPs’ Appetite for Timber Funds – December 2013

by Firakh Patel

  • 17 Dec 2013
  • PE
  • NR

US-based LPs continue to be an important source of capital for timber fund managers on the road. Preqin’s Investor Intelligence online service currently tracks 5,262 LPs, 280 of which have shown some level of interest in timber funds. US-based investors account for 85% of all LPs that target, or have previously invested in, timber vehicles. 

Massachusetts-based public pension fund, Haverhill Retirement System, recently issued an RFP for a new timber investment manager which is set to receive a commitment of $5mn from the pension fund. Haverhill Retirement System has had previous exposure to timber funds, including a commitment to GFP Global Timber Investors 8. New Mexico State Investment Council (SIC) has recently committed $100mn to Hancock ForesTree XII, a forestry fund targeting investments in the timber and forestry industries in the US, Canada, Australia, New Zealand and Brazil. 

When looking at the type of investors that invest in timber funds, public pension funds represent the highest proportion of LPs with an appetite for this fund type, representing almost a third (32%) of such investors. Foundations account for 22% of US-based LPs that invest in timber funds. Endowment plans and private sector pension funds also represent a significant proportion, both representing 19% of investors in such funds. 

Timber investors in the US manage aggregate assets of over $4.1tn and are, on average, slightly under their target allocation to private equity. The average target allocation of US-based LPs (excluding fund of funds managers) with a preference for timber is 11.9% of total assets, whereas on average they have a current allocation of 11.4%. Similarly, all LPs in the private equity universe which target timber funds are, on average, below their target allocation of 11.9%, with 11.8% allocated. 

With continued interest in timber funds by North America-based LPs, 2014 looks set to see continued investment in this sector as investors continue to target this niche fund type to both expand, and diversify their private equity portfolios.

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