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Investors - AUGUST 6, 2018

CalPERS loses $500m on timber investment

by Andrea Zander

The $351 billion California Public Employees’ Retirement System reported it lost more than $500 million on timberland investments as part of its Lincoln Timber LP investment, according The Financial Times.

CalPERS exited the remainder of this investment in June with the sale of 1.1 million acres in east Texas, for $1.39 billion, a loss of $355 million on the purchase price. Combined with losses on disposals of previous portions of the holding, the total loss was more than $500 million.

CalPERS purchased Lincoln Timber in 2008 for $2.38 billion.

CalPERS’ return on the investment was a negative 0.5 percent over 10 years, underperforming its benchmark, the NCREIF Timberland Index, by 497 basis points during that time.

The Financial Times reported, “Many pension funds and endowments were lured into woodland in the past decade by the alternative asset class’s high returns and lack of correlation with other markets. But the CalPERS consortium wound up buying land in the southern United States just in time for a construction slump that has depressed log prices in the region to this day.”

 

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