Big Pension Funds Flow to New Timber Partnership

Three state pension funds made big commitments this week to a new timber investment partnership, and several other pension funds are expected to follow.

The Washington State Investment board, the Oregon Public Employees Retirement Fund and the Alaska Permanent Fund have collectively committed $600 million to the venture, which owns 260,000 acres of timberland in the Southern United States.

More from Reuters:

The Washington State Investment board has committed $300 million, the Oregon Public Employees Retirement Fund put up $200 million and the Alaska Permanent Fund Corporation committed $100 million to the joint venture called Twin Creeks Timber LLC.

The joint venture is being run by Plum Creek Timber Company, the biggest landowner in the United States, which owns a big chunk of the trees that will be in the portfolio, and alternative investment boutique Silver Creek, which will do the monitoring of the investments for the institutions.

Two other pension funds, one on the east coast and one in California, are expected to commit another $150 million to the investment. “We think we will end up with five investors,” said Bob Ratliffe, a managing director at Silver Creek, adding “what’s new here is having public pension funds partner with a publicly traded timber company.”

Investors will lock up their money for 15 years at a time where annual investment returns are seen to be between 4 percent and 5 percent.

The new investment partnership comes as institutional investors are hungry for fresh asset classes that are not tied to stock and bond markets and can help beef up returns over the long term. The trees in the portfolio are earmarked for building new homes, repairing existing homes and other industrial purposes.

More information on the venture can be read here.

Photo by Rick Payette via Flickr CC License