For example, the US-based Harvard Endowment has increased its share of real assets to 25 per cent. Of this, 13 per cent consists of investments in natural resources, half of which is forest. In Finland, Ilmarinen has set a goal to increase the share of real assets in its investments to 20 per cent.
Direct forest investment is also a good addition to a high-net-worth investor’s portfolio. Forest is a low-risk investment asset and balances fluctuations in value. The Sharpe ratio, which measures risk-adjusted return, is high compared with other investments. Additionally, forest is valued as an inflation hedge. The correlation with the stock market is low, and the price development of stumpage prices and forest land has historically been stable. By timing timber sales according to market conditions, fluctuations can be reduced even further. Timber sales also allow returns to be realised flexibly, in terms of both timing and quantity.
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