UNITED STATES- Orange County Employees Retirement System has made a selection of two managers to invest $140m (€102.2m) in timberland assets.
Hancock Timber Resource Group and RMK Timberland Group have been awarded mandates to manage $100m and $40m respectively to fulfil Orange County’s 2% timberland allocation following a board meeting on July 16.
Whereas some pension funds might disagree, assets held within this investment space are not considered to be real estate, according to Lorelei Chao, investment officer for the pension fund.
"This allocation did not come out of the real estate asset class. It came from the Treasuries Inflation Protected Securities (TIPS) asset class," said Chao.
"We felt that this asset field needed some diversification and investments that can deliver solid long-term returns. These are attributes that timberland can do for the TIPS part of our portfolio."
Hancock Timber has a global mandate to invest via a separate account relationship with up to 35% leverage to generate a real return of around 7% on the global timber portfolio.
Hancock Timber had $5.4bn in assets under management to the end of 2006 and was selected for by Orange County for its experience in global investing as the firm has around 38% of its total portfolio in international markets, the largest of which is New Zealand but includes investments in Brazil, Australia and Canada, and mainly targets large timberland tracks.
RMK, meanwhile, has a US-based separate account mandate between the manager and Orange County Employees which carries no leverage and is expected to generate a nominal return of 10-12% nominal return on transactions in smaller properties. RMK has assets under management of $1.4bn.
