About IFIA

Clark S. Binkley (CV) founded International Forestry Investment Advisors, LLC (IFIA) in April, 2005.

Marc A. Hiller (CV) joined IFIA in 2006 to support IFIA with acquisitions and asset management, especially in South East Asia.

We seek innovative ways to create higher returns from forestry assets while maintaining their desirable diversification benefits. We assist sophisticated investors in this endeavor by developing innovative investment strategies and creating specialized investment products to implement these strategies. These investment strategies focus on opportunities neglected by other investment managers, at the moment including emerging markets, technology and capital-market arbitrage. IFIA implements these strategies in collaboration with other organizations that complement our skills. At year end 2008, IFIA co-managed capital exceeding $500 million.

Timberland investment comprises the private-equity ownership of forest land and trees. Such investments have proved to be a beneficial component of mixed-asset portfolios. Returns have been good, averaging 15.2% for the 20-year period ending 31 December 2006 (since the data started being collected by NCREIF). Volatility of returns has been a bit less than that for large-cap equities. The Sharpe Ratio for US timberlands has averaged about 0.50 since 1960, comparing favorably with venture capital, direct energy investments and international equities. Most significantly, timberland returns have had low or negative correlations with most other assets. Timberland has been a low-beta, positive alpha asset. Together these facts mean that even small allocations to timberland have improved the risk-efficiency of investment portfolios held by pension funds, family offices, endowments, and foundations.

But, the outlook for traditional timberland investment is troubling. The asset class is comparative small, amounting to perhaps $200 billion world wide. As returns from other investment opportunities—fixed income, public equity, commercial real estate—fell over the past few years, more capital moved into timberland. The result was falling returns—by some estimates 300+ bps over the last three years. And, there is some evidence that the "quality" of returns is deteriorating as well, with acquisition underwriting now assuming rising real timber prices, material cash flows from "higher and better use" sales, and lower cap rates on exit. Returns from conventional timberland investments also appear to have become far more highly correlated with broad market indicators than they have been in the past. Because of the backward-looking nature of timberland appraisals, valuations were slightly up at year-end 2008 despite a sharp deterioration in the asset-class's fundamentals and increases in the returns from nearly all other investment alternatives. While some investors may be satisfied with this situation, IFIA is not.