US public pension funds have further increased their exposure to alternative investments, in a move welcomed by AAA.
Boston, MA, August 23, 2012 - US public pension funds have further increased their exposure to alternative investments, in a move welcomed by Alternative Asset Analysis (AAA).
The alternative investment advocacy group claims that the pension funds are finding it increasingly difficult to raise enough cash as a result of low interest rates and poorly performing equity markets. “Off the back of these variables pension funds are investing billions in a whole range of alternatives asset classes,” explained AAA’s analysis partner, Anthony Johnson.
The Wiltshire Trust Universe Comparison Service found that pension funds worth $1 billion or more had a median of 15 per cent of their portfolio of investments in alternatives as of June 2012. This is up a significant amount from the 9.2 per cent in the same month a year ago.
Although some critics claims that there are risks involved with alternative investment, AAA claims that this all depends of the kind of alternative one chooses. Forestry and timberland investment, for example, carry relatively low risks as investors are able to hang on to their asset (the trees they have bought or invested in) until they are the right size and until timber prices are high.
“Investing in timberland not only offers investors an ethical choice, which helps to reduce deforestation, but also provides a great choice for pension funds as timberland investment are a good medium-to long-term option.”
Investing directly in trees by buying up forest land can generate good returns if the trees are left to grow for a very long time before they are felled and sold as timber. However, investing directly through plantation projects, such as the one run by Greenwood Management in Brazil, can mean investors see returns much sooner. This is due to the cyclical planting and felling model used in the firm’s sustainable plantations.
Alternative Asset Analysis
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