Wednesday, March 7, 2007

Cambium Raises Cash

The Scottish financial investment firms are teaming up with the Brits to put more money into the global timberland investment market.

"Cambium, which is incorporated in Jersey, will invest in a diversified portfolio of timberland assets. The placing raised £104m from Scottish institutions and from investment funds like British Steel Pension Fund, Altimus, Midas Capital and AXA-Framlington. Cambium intends to invest the cash raised in a global portfolio of forestry-based properties and in forests that can be managed on a sustainable basis, McGrady said. Cambium is the first purely timberland investment vehicle to be hedged into sterling and designed specifically for British investors. Read more.


It seems like every day more money pours into the timberland market. Are we in the early stages of a developing "timberland bubble"? The positive market factors (beyond historical returns of timberland) include the political momentum for carbon sequestration and energy independence. The down side is a lot of money chancing a fairly finite land base. Another positive point is that if institutional investors have really accepted timberland as a separate asset class, there is still a HUGE amount of money to flow in that direction. As we are seeing from the Brits. And yesterday's Bank of America announcement. Temple-Inland should do quite well.

4 comments:

  1. Brian,
    the bubble is there, but due to the dual nature of timber(land) it will be quite different from the housing, internet or other bubbles. I suppose you have seen this last fall:
    "At the recent European Financial Association Conference in Zurich, a number of major UK hedge fund managers confirmed they would be diversifying into timber after having looked at the American experience."
    source: http://www.thebusinessonline.com/Document.aspx?id=5D97C4B1-40F4-4B15-91F4-5E4B6DE7100C

    So, we have not seen the inflow of hedge funds into timberland investing - just yet.
    Unlike the previous bubbles, the timberland provides a nice opportunity to wait-over the HBU downcycle (in my opinion that is what drives above-par returns from timberlands) with low, but still positive returns (not to mention all the diversification potential). Most of the investors are into timberlands for a long-term (in part due to illiquidity of current "timberland-only" investments in TIMOs), and as you mentioned about the finite land base (Amazon has significant environmental constraint and Russia - political, legal and economic) the demand is very likely exceed the supply in the next decade or so.
    What I am hoping to see in the near future is pure-timber REITS (no manufacturing, just timber, timberland). It will likely fix the liquidity question and open door for smaller investors in timberland.

    Tim

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  2. Some colleagues and I from the Timber industry are starting an HBU Land fund. We intend for the structure to resemble a hedge fund, in order for us to have the flexibility we need to maneuver. Do you know any hedge funds who have allocations to timber or real estate (HBU)? We are actively looking for the right partners.

    LSO

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  3. Brookfield(BAM) is a private equity firm that took Brascan private. They have acquired additional timberland (including Longveiw Fiber) and now own about 2.5 million acres, maybe more. They have a private equity fund (not sure if that meets the hedge fund description)but I think that is where you are going. The name of the fund is Island Timberland Fund which reportedly has both institutional and retail clients. --Brian

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  4. In September I would have speculated that MS would not be treating a first-tier Orange Country business investment like Blackstone this way. But as the Fall has progressed and the potential liability increased it is clear that banks are willing to risk even their largest clients to wriggle away from some of these deals.

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