California’s public-employee pension fund—CalPERS—is reportedly looking to unload some trees. About 300,000 acres-worth, according to The Wall Street Journal, which reports CalPERS wants to sell timberland it owns in the Southeastern U.S.
CalPERS lists about $2.2 billion-worth of forestland investments in its $300 billion portfolio; it has much bigger stakes in investment classes such as stocks, bonds and real estate. The investments fund the pensions of more than 1.5 million California public employees and retirees in California.
Back in the early 2000s, the trend was to diversify investments to get higher returns (CalPERS faces underfunded pension liabilities, as do many other state pension funds). But some alternative investments didn’t pan out, says economist John Canally at LPL Financial.
“What happened to timber prices over the last 10 years, you basically got no return on forestry stocks,” says Canally. He says the housing crash and global recession depressed the lumber market. If pension funds like CalPERS had left their money in stocks and bonds, he says, their investments would have been more profitable in the long run.
A spokesman for CalPERS told Marketplace by email that he could not confirm any plans to downsize CalPERS’ timber holdings or review that segment of the fund’s portfolio.
University of Georgia forestry business professor Thomas Harris says that if CalPERS did want to sell its timberlands in Louisiana and East Texas, there would be plenty of potential buyers. “Weyerhauser, Potlach, Plum Creek, have been active in acquiring timber land,” says Harris. “There’s interest by pension funds and high-wealth individuals.”
Harris says timber can be an attractive and stable investment because the trees keep growing, getting more valuable as time goes on.