Money Grows on Trees, Slowly

Invest capital and save the planet at the same time. Own a forest.

- William Baldwin

Forest Activist Davis, in her 32ndfloor Portland office, looks down on the idea that we should always allow nature to take its course. Remember that smoke wafting in from Canada last year? "The forests are burning because there's a beetle infestation," she says.

'That's the selling proposition from Angela Davis, who, as president of Campbell Global in Portland, Oregon, oversees $10 billion on behalf of institutions and wealthy individuals. So far she has acquired 1.4 million acres of trees, the majority in the U.S., with some in Australia and New Zealand.

Do not expect from timberland the kind of action you'd get from a semiconductor stock. “Forest investors are typically not looking for high risk and high return,” Davis says. What are they looking for? Four other things: a yield, an inflation hedge, a portfolio-stabilizing lack of correlation to the stock market and the environmental virtue that comes from taking carbon out of the air.

The yield comes naturally. Trees grow. Douglas fir, the money tree in the Pacific Northwest, is harvested at 45 years of age. A timberland property that contains tracts evenly distributed over the age spectrum will have an average age of 22. This means the wood that can be taken annually from mature trees comes to 4.4% of the total volume of wood in the forest.

That 4.4% botanic payout is the starting point for expected return. Log prices, sensitive to home-building demands, are extremely volatile, but over the long pull they, and the residual value of cleared land, should keep up with inflation. Add in inflation and a 7% nominal return is within reach.