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SACRS Spring Conference 2009 May 14, 2009. S UCCESSFUL S TRATEGIES = RMK T IMBERLAND G ROUP. A R E G I O N S M O R G A N K E E G A N C O M P A N Y. AGENDA. History of Timberland Investments Why the Asset Class? International Timber Global Portfolio Strategy Summary.
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SACRS Spring Conference 2009 May 14, 2009 SUCCESSFUL STRATEGIES = RMK TIMBERLAND GROUP A R E G I O N S M O R G A N K E E G A N C O M P A N Y
AGENDA • History of Timberland Investments • Why the Asset Class? • International Timber • Global Portfolio Strategy • Summary
TIMBERLAND INVESTMENT MANAGEMENT History of Timberland Investments We see the forest. And we see the trees.
HISTORY OF TIMBERLAND INVESTMENTS • Institutional Investment in Timberland Dates Back to the 1980’s • Early Investors: • Insurance Companies (Travelers) • Pension Funds (CALPERS) • Institutional Assets in Timberland
5 COMMERCIAL TIMBERLAND ACRES & OWNERSHIP CANADA: 602 MM ACRES 91% PUBLIC 9% PRIVATE WEST: 203 MM ACRES $365 BILLION 63% PUBLIC 37% PRIVATE N. CENTRAL: 80 MM ACRES $40 BILLION 28% PUBLIC 72% PRIVATE NORTHEAST: 79 MM ACRES $47 BILLION 12% PUBLIC 88% PRIVATE SOUTH: 210 MM ACRES $210 BILLION 10% PUBLIC 90% PRIVATE
TODAY’S INVESTORS • Pension Funds • Foundation/Endowments • Private Investors
TIMBERLAND INVESTMENT MANAGEMENT Why the Asset Class? We see the forest. And we see the trees.
WHY THE ASSET CLASS? • Competitive Historic Returns • Low Volatility of Returns • Portfolio Diversification
ANNUALIZED RETURNS 1.1.87 THROUGH 12.31.07
STANDARD DEVIATION OF RETURNS 1.1.87 THROUGH 12.31.07
CORRELATIONS TO TIMBERLAND 1.1.87 THROUGH 12.31.07
RETURN/RISK (Sharpe Ratio) 1.1.87 THROUGH 12.31.07
Without Timberland With Timberland 13 PORTFOLIO ENHANCEMENT WITH TIMBERLAND EFFICIENT PORTFOLIOS Return Risk
WHY THE ASSET CLASS? • Trees Grow • Growth Adds Value • “Store on the Stump”
SOURCES OF TIMBERLAND RETURN Land (6%) Timber Price Change (33%) Biological Growth (61%) Representative loblolly pine plantation in S. Georgia (Caulfield 1998)
TIMBERLAND INVESTMENT MANAGEMENT Portfolio Strategy We see the forest. And we see the trees.
17 STAGES IN THE LIFE OF A FOREST GROWTH ESTABLISHED EMERGING MATURE AGE GROWTH GROWTH GROWTH PULPWOOD SAWTIMBER CHIP-N-SAW
TIMBERLAND INVESTMENT MANAGEMENT International Timber We see the forest. And we see the trees.
“FAST GROWING PLANTATION REGION” BECOMING A REAL PRESENCE • “Fast Growing Plantation” Region • Now includes Australia, Argentina, Brazil, Chile, New Zealand, Uruguay, South Africa, Swaziland • Potentially Vietnam, Moçambique & others • Characterized by fast tree growth, low raw material costs, low growing costs, low production costs • Major new investments by global manufacturers in production and processing
CURRENT FAST GROWING PLANTATION REGION COUNTRIES
PLANTATION GROWTH RATES FGP REGION COUNTRIES VS. U.S. SOUTH Source: Caulfield 1998
MANUFACTURING FACILITIES 6 Sao Paulo 9 8 6 7 PORT FACILITIES Porto Alegre 5 4 5 3 2 1 2 1 10 4 3 MAJOR MANUFACTURING & PORT FACILITIES
TIMBERLAND INVESTMENT MANAGEMENT Global Portfolio Strategy We see the forest. And we see the trees.
GLOBAL PORTFOLIO STRATEGY • Expected • MarketsReal Returns • Mature 6-7% • Developing 10-12% • Emerging 15%+
SUMMARY • Long, Successful History by Institutional Investors • Strong Portfolio Characteristics • Ability to Build Portfolios to Meet a Variety of Risk/Return Characteristics