Dutch giant looks to the trees (updated)
NETHERLANDS - The €209bn Dutch pension fund ABP is mulling a first foray into timberland investments in a further attempt to diversify its portfolio (update with comments from ABP).
"Given the unique characteristics of the asset, the value added of timberland investment is to further diversify the ABP portfolio as a return enhancing investment. In the coming period we will look for investment opportunities in this area," a spokesman for the fund said.
These investments can be made worldwide and the size of these investments will depend on the investment opportunities (deal flow) in this asset category.
The future investment would be part of the fund's new innovation portfolio, intended as a platform for new internal and external mandates that "fall outside existing structures/mandates, and offer potential in terms of scale," the fund said.
Timberland's return profile makes it attractive and it is largely uncorrelated with other asset classes, the fund has said.
However, there are no certain plans yet about where, when and how much the fund will set aside for timber.
Earlier this month, ABP announced that it would set aside a maximum of 2% of its entire assets - approximately €4bn - to put into the innovation portfolio.
"Innovation is an important momentum for attractive returns in the future," the fund said during the presentation of its fourth quarter results.
It added that the innovation portfolio will be "utilising the advantages ABP offers as a long-term investor, with the own professional organisation and excellent opportunities for diversifying risk and risk control."
It also emerged that the fund has cut its exposure to US equities from 50% to 40% in the last quarter of 2006 in order to reduce concentration risk and increase diversification into emerging markets.
The news follows reports that ABP, as part of a group on international investors, has written a letter to the US regulators, politicians and bourses, in an effort to allow shareholders greater say in voting company directors onto boards.