Pictet-Timber Fund

For professional investors only
Pictet-Timber Fund
33 c.160
%
companies active
along the
timber value chain
estimated growth in Chinese
import of wood fibre
between 2015 and 2020 1
Invest in one of the future’s
key strategic natural resources
80
Single family home starts in the US
still have to increase
%
to sustain long term
2
trend needs Source: RISI Inc. 2013 China Timber Outlook
Source: Bloomberg, U.S. Census Bureau,
Pictet Asset Management estimates, as of 31.08.2015
1 2
Pictet-Timber Fund
REASONS TO INVEST
Increasing demand
Helping the environment
Economic and demographic growth, especially in Asia,
will drive demand for timber in key areas such as building,
construction and personal consumption. While the average
American uses nearly 300kg of paper a year, the global
average is only 55kg.3 As living standards improve in the
emerging nations, consumers will require more processed
timber, particularly paper, food packaging and hygiene
products.
Forests store an enormous amount of carbon – more than is
currently contained in the Earth’s atmosphere.5 Wood is
carbon-neutral, absorbing as much CO2 as it releases when
burnt. Timber can also be turned into a highly efficient
biofuel. Unlike other plant-based ethanols, biofuel from
trees does not reduce the land available for growing food.
Shrinking supply
The fund’s investable universe includes around 160
companies, two thirds of which are located in developed
markets. It invests in companies active throughout
the entire timber supply chain, from growing the raw
material to processing it for consumer goods. There is a
strong focus on companies that own or manage forests
and timber land.
Across the world, forest land is lost each year due to
deforestation. c.20% of US Softwood demand is historically
imported from British Columbia, but a pine beetle infestation
has damaged an estimated 50% of trees in the region.4
Decreasing availability and a growing demand for timber
will inevitably lead to an increase in the price of wood.
Wide exposure to opportunities
A growing asset
Because the value of timber increases with age, it is largely
unaffected by a slowdown in economic activity – profits
are simply deferred to a later date, when the trees are even
more valuable.
3
Source: Finnish Forest Industries
Source: Ministry of Forests, Lands and Natural Resource Operations, British Columbia
5
Source: Global Forest Resources Assessment 2005, FAO
4
WHY NOW?
After a slowdown in house-building over the last few years, the US housing market is growing again. Chinese
imports of North American Lumber has increased more than tenfold in the last five years.6 Timberland holdings
of listed companies are severely undervalued by the market, some by as much as 30% below the private equity
market.7 In our view, this is an excellent time to invest in timber as the sector is well-placed to benefit from a
recovery in the US housing market and growing demand from Asia.
WHAT IS IT?
HOW CAN IT HELP?
WHO IS IT FOR?
The fund aims to deliver long-term
capital growth by investing in
companies with a high exposure to
timber resources, primarily as forest
land, but also including wood-related
materials such as pulp, paper and
board, packaging and processing.
Traditionally, this valuable resource
has only been accessible through
private equity schemes. By investing
in publicly listed companies, the fund
offers investors exposure to the benefits
of the asset class with higher liquidity
and better diversification in terms of
regional exposure and segments than a
direct investment in timber land.
The fund could be suitable for
investors who are prepared to invest
for the long term and are willing to
take a potentially higher risk with
their investment.
Pictet Asset Management
6
Source: FAOSTAT
Source: Pictet Asset Management estimates, as of 31.08.2015
7
2
Timber will be one of the key strategic resources of the future. An extremely
versatile material, it is more energy-efficient, renewable and recyclable than
concrete, brick or steel. Forests cover 30% of the world’s land, but only a third of
this is available for productive forestry.3 With growing demand, limited supply
and increasing environmental pressures, we believe timber represents a
compelling investment opportunity for the longer term.
GABRIEL MICHELI
Senior Investment Manager
SUPPLY SQUEEZE: A LIMITED RESOURCE UNDER PRESSURE
Global forested areas have decreased, with developing countries leading annual net loss (1990-2015).
Eastern Canada has significantly
reduced its annual allowable cut.
NET LOSS
More than 500,000ha
• >100,000-500,000ha
• >10,000-100,000ha
•
South East Asia
has one of the worst
track records in
deforestation, as the
forest is replaced by
palm oil plantations.
Brazil’s awful deforestation
record is slowly improving.
Fast growing Eucalyptus
plantations can provide a
sustainable alternative for
pulp production and export.
Africa: remaining forest under intense pressure.
Sustainable forestry opportunities very limited due to
severe political, governance and infrastructrue challenges.
Source: FAO 2015, Pictet Asset Management as at 31.08.2015
BIOLOGICAL GROWTH – VALUE OF FORESTS INCREASES WITH AGE
WHAT ARE THE RISKS?
Example: timber value in southern yellow pine.
• Past
1 foot = 30.48 cm 1 inch = 2.54 cm
Height in feet
100
$21/ton
average value
80
60
40
• The
$8 – 12/ton
average value
Premerchantable
8
13
19
24
years
years
years
years
1st Thin*
100% pulpwood
2nd Thin*
42% pulpwood
50% chip-n-saw
8% sawtimber
Final Harvest
20% pulpwood
30% chip-n-saw
50% sawtimber
20
0
$32/ton
average value
* Thinning is the cutting down and removal of a proportion of trees in a forest crop
Sources: Plum Creek, Pictet Asset Management, 2015
performance is not a guide
to future performance. The
value of an investment can fall
as well as rise and you may not
get back the amount originally
invested.
fund may be invested in
emerging markets. Investments
in emerging markets can
potentially be of higher risk
and volatility than those in
developed markets.
• Investments
are made in assets
that are denominated in foreign
currency and are not hedged
back to the base currency of
the fund. Changes in exchange
rates may therefore affect the
value of the investments.
Pictet-Timber Fund3
HOW WE INVEST
INVESTMENT THEME
INVESTABLE UNIVERSE
The Pictet-Timber Fund
invests in companies
with a high exposure to
timber resources that have
the potential to generate
attractive returns over the
long term. We focus on those
companies owning forests
and timberland. We invest
only in listed securities.
c. c.
c. Quantitative screening of a
global equity database of
40,000 companies to create
our universe of potential
investments. We only invest
in companies that have more
than 20% exposure to the
theme of timber.
Initial portfolio weights
are based on the theme
purity and portfolio
construction factors, such
as trading liquidity, and
share price volatility.
The portfolio target weights
are based on the initial
portfolio weights adjusted
for company factor scores
(quality of management,
business franchise, valuation)
and industry factor scores.
160 stocks
KEY PRODUCT FACTS
INVESTMENT TEAM
September 2008
Gabriel Micheli
Christoph Butz
REFERENCE INDEX
PRODUCT SPECIALIST
Marc-Olivier Buffle
LEGAL STATUS
Sub-fund of the Luxembourgregistered Pictet SICAV
WANT TO FIND OUT MORE?
www.pictetfunds.com
www.pictet.com
80 stocks
PORTFOLIO CONSTRUCTION
40-60 stocks
ABOUT PICTET ASSET MANAGEMENT
LAUNCH DATE
MSCI World
SHORTLIST
Pictet Asset Management is a specialist asset manager
offering investment solutions and services to investors around
the world.
Today we manage CHF 152 billion/EUR 146 billion/GBP 103
billion/USD 162 billion of assets across a broad range of equity,
fixed income, alternatives and multi-asset strategies.
Our mission is to build lasting partnerships with our clients by
exceeding their expectations for investment performance and
service. Our clients include some of the world’s largest pension
funds, sovereign wealth funds and financial institutions.
We have 764 employees spread across 17 offices worldwide
including 7 investment centres (Geneva, Zurich, London, Milan,
Singapore, Tokyo and Hong Kong).
We are part of the Pictet Group, founded in Geneva in 1805,
which also specialises in Wealth Management and Asset
Services. Privately owned and managed by seven partners, the
Pictet Group has 3,919 employees in 26 offices around the world.
All data as at 30 June 2015
Disclaimer
For professional investors only—This marketing material is issued by Pictet Asset Management (Europe) SA. It is neither directed to, nor intended for distribution or use by, any person or entity who is a citizen or resident of, or
domiciled or located in, any locality, state, country or jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. Only the latest version of the fund’s prospectus, KIID (Key Investor
Information Document), regulations, annual and semi-annual reports may be relied upon as the basis for investment decisions. These documents are available on www.pictetfunds.com or at Pictet Asset Management (Europe) SA,
15, avenue J. F. Kennedy L-1855 Luxembourg. The information and data presented in this document are not to be considered as an offer or solicitation to buy, sell or subscribe to any securities or financial instruments. Information,
opinions and estimates contained in this document reflect a judgment at the original date of publication and are subject to change without notice. Pictet Asset Management (Europe) SA has not taken any steps to ensure that the
securities referred to in this document are suitable for any particular investor and this document is not to be relied upon in substitution for the exercise of independent judgment. Tax treatment depends on the individual circumstances of each investor and may be subject to change in the future. Before making any investment decision, investors are recommended to ascertain if this investment is suitable for them in light of their financial knowledge
and experience, investment goals and financial situation, or to obtain specific advice from an industry professional. The value and income of any of the securities or financial instruments mentioned in this document may fall as
well as rise and, as a consequence, investors may receive back less than originally invested. Risk factors are listed in the fund’s prospectus and are not intended to be reproduced in full in this document. Past performance is
not a guarantee or a reliable indicator of future performance. Performance data does not include the commissions and fees charged at the time of subscribing for or redeeming shares. This marketing material is not intended
to be a substitute for the fund’s full documentation or any information which investors should obtain from their financial intermediaries acting in relation to their investment in the fund or funds mentioned in this document.
© Copyright 2015 Pictet – Issued in September 2015.
Pictet-Timber Fund4