PCL & RYN both operate as REIT's ans LSC is an ETN commodities.
The main point of my post was to point out that all the assest do better if they are equal weighted unless you have a crystal ball that tells you which might be better in any given year.
Here are the MF they use:
VIPSX, VBMFX, RPIBX, VGSIX, FIREX, PCRDX, PCL & RYN, VTSMX, VDMIX AND VEIEX.
In their opinion why wood is a separte asset class:
The fact that timber is not included in most futures-based commodity index funds has led many investors to ask if it should be treated as a separate asset class. The answer from a growing number of institutional investors is, "yes." To begin with, timber has a unique three-part return generating process. Current income is provided by cutting and selling the timber. Over time, timber demand tends to grow with real gross domestic product, while timber prices have historically tended to rise at a rate somewhat above inflation.
Capital appreciation on a timber investment comes from the appreciation of the land itself (e.g., as it becomes more valuable to housing developers), and from the natural growth of the trees. Measuring the historical returns and risks on timber is somewhat difficult because of the absence of a standardized tradable product that covers the whole asset class. As a result, different methods have been used to construct "synthetic" indexes. For example, the National Council of Real Estate Investment Fiduciaries is a group of institutional investors who directly own timber and other commercial properties. Their index is constructed on the basis of actual returns their members have earned on timber properties in the United States. In contrast, the Hancock Timber Resources Group uses an econometric approach based on timber prices to estimate returns on timber not only in the United States, but also in two other key production areas, British Columbia and New Zealand. The good news is that both deliver similar estimates of the risk and return for this asset class. Between 1989 and 2004, the average real U.S. dollar return on the (U.S. only) NCREIF Timber Index was 10.67%, with a standard deviation of 8.76%. Between 1963 and 2002, the average real U.S. dollar return on the global Hancock Timber Index was 9.29% with a standard deviation of 12.40%.
However, you cannot invest in a timber index; you can only invest in companies or trusts that own timber, which exposes you to alpha in addition to beta risk. For example, between 1990 and 2004, Plum Creek Timber (PCL), which owns a well-diversified group of properties in the United States, delivered average annual real returns of 25.34%, with a similar standard deviation. However, in New Zealand, the three major timber companies (Carter Holt Harvey, Fletcher Forests, and Evergreen Forests) all had negative average real returns over the past ten years (Fletcher has consequently sold its timber properties, while the other two are reducing their holdings). Other possible timber investments include Rayonier (RYN), Deltic (DEL), TimberWest (TWF.UN), and West Fraser Timber (WFT.TO).
With that important caution in mind, let's take a look at the real returns on timber over the 1989 -2004 period in different currencies, and their correlation with returns for other asset classes over this period.
As you know, we use two different tests to define an asset class. First, it must have a return generating process that is substantially different from those of other asset classes. Second, its correlation of returns with other asset classes must, on average, be less than .65 (which leads to asset allocation solutions that are relatively insensitive to small changes in expected returns). We conclude that timber meets these tests, so we will include it as a possible asset class when we update our model portfolios later this year. In the meantime, we are also including year-to-date nominal returns for timber in our global asset class returns summary. This return is a weighted (70/30) combination of the year-to-date returns on Plum Creek Timber (PCL) and Rayonier (RYN).
Hope this helps
Larry G
