Section 14 The Role of Real Assets .


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2. In spite of the fact that knowledge can't be gotten for gold, still les would it be able to be gotten without it. - Samuel Butler. 3. Plot. IntroductionReal home in generalTimberland in particularGold. 4. Presentation. Most portfolio ventures are monetary resources, such as:Common stockCorporate bondsBank CDs.
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Part 14 The Role of Real Assets

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Though astuteness can\'t be gotten for gold, still les would it be able to be gotten without it. - Samuel Butler

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Outline Introduction Real bequest when all is said in done Timberland specifically Gold

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Introduction Most portfolio ventures are money related resources ,, for example, Common stock Corporate securities Bank CDs

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Introduction (cont\'d) Real resources : Are expecting an expanded part in a portion of the nation\'s biggest annuity reserves and in private financial specialist portfolios Include timberland and gold Do not have a comparing obligation unless one is made to back the buy of the genuine resource

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Real Estate in General Investment qualities Developed and undeveloped property Pension support interest in land

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Investment Characteristics of land: Immobile Land can\'t be moved Indestructible Land can\'t be demolished Nonfungible Ever plot of land is one of a kind

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Investment Characteristics (cont\'d) Characteristics of land (cont\'d): Land is regularly a long haul speculation Especially for institutional timberland proprietors Land can be a transient venture E.g., timberland might be utilized for advancement or the extraction of minerals

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Real Estate Categories

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Developed and Undeveloped Property Developed property is land with changes on it E.g., shopping centers and condo edifices Purchased by speculators for: Income-delivering attributes The assessment advantage from devaluation of structures

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Developed and Undeveloped Property (cont\'d) Undeveloped (crude) property has no upgrades E.g., undeveloped parcels Investors buy undeveloped property: To theorize For the creation of subdivided parts for resale or improvement

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Pension Fund Investment in Real Estate U.S. benefits reserves have almost $100 billion put resources into land In 2000, the normal annuity finance had around 20 percent of advantages put resources into land Real bequest venture can be advantageous through a land speculation confide in (REIT)

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Timberland in Particular Introduction Institutional enthusiasm for timberland A timberland venture groundwork

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Introduction Timberland is an exceptionally practical speculation type of land for vast portfolios The U.S. envelops around 468 million sections of land of timberland

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Institutional Interest in Timberland Innovative types of possession in timberland have been created: Public restricted associations Closed-end speculation organizations in timberland Securitized units of timberlands of woodland item organizations

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Institutional Interest in Timberland (cont\'d) Examples of institutional premium: Timberland venture administration associations (TIMOs) oversaw about $9 billion in timberland close to the finish of 2001 In 2001, Harvard Management put 6 percent of its $18.3 billion portfolio into timberland

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A Timberland Investment Primer Timberland as a benefit Timberland speculators Timberland returns Timberland dangers Problem of absence of data Timberland as a portfolio segment Future prospects

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Timberland as An Asset Timberland as guarantee Timberland as a vital speculation Timberland as an immaculate speculation

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Timberland as Collateral Loans are routinely secured with timberland by: Life insurance agencies The Federal Land Bank

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Timberland as A Strategic Investment Timberland fills in as a vital venture while owning it: Helps guarantee the long haul practicality of an organization or Reduces the instability of an organization\'s money streams

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Timberland as A Pure Investment Portfolio administrators hold timberland as an unadulterated speculation: The property is held for its own venture justifies The property is not held as a component of a vital arrangement or to aid extend financing

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Timberland Investors The biggest current proprietors of timberland for unadulterated venture reasons for existing are: CALPERS John Hancock Financial Services New Hampshire State Employees Retirement System

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Timberland Investors (cont\'d)

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Timberland Returns Timber develops on the land and is sold and reestablished Growing timber is stumpage The estimation of a remain of timber relies on upon: The volume of wood on the real esatate The size and nature of the trees The market cost of the types of backwoods items

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Timberland Returns (cont\'d) A timberland speculator\'s arrival is an element of: The obtaining expense and offering value Site profitability The capacity of a site to develop timber, relies on upon climate, soil conditions, and so on. Administration capability Silvicultural practices and administration methodologies can influence return

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Timberland Returns (cont\'d) A timberland speculator\'s arrival is an element of (cont\'d): Market cost Investors have generous watchfulness as to time of reap Price is affected by the relative size of trees on the land

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Timberland Risks Biological dangers Economic dangers

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Biological Risks Biological hazard is the danger of misfortune because of characteristic occasions: Fire Insects Disease Productivity Wind

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Biological Risks (cont\'d) Productivity chance alludes to the likelihood that a remain of timber won\'t create the foreseen volume of wood because of: Species rivalry Drought Disease

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Economic Risks Economic dangers include: Quality Liquidity Demand Price Management hones Changes in the administrative condition

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Economic Risks (cont\'d) Management chance implies that poor administration practices can disintegrate the estimation of timberland Liquidity chance exists in light of the fact that there is a generally constrained market for timber and timberland Regulatory hazard comes from statutes and mandates that breaking point backwoods administration and land utilize choices

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Problem of Lack of Information Problems with developing a standard timber list: Must consider the development in timber volume Must consider the low instability related with land Focusing on timber costs alone predispositions the arrival descending and inclinations unpredictability upward Timberland is nonfungible

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Problem of Lack of Information (cont\'d) Examples of timber records: Wachovia\'s Timberland Performance Index (TPI) The Warnell School\'s Timber Mart South and Timber Mart North Log Lines National Council of Real Estate Investment Fiduciaries

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Timberland as A Portfolio Component Virtually all investigations of timberland find low or contrary connection amongst\'s timberland and other venture choices Allows for significant broadening benefits

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Timberland Correlation Coefficients (1960-2000)

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Risk and Return (1981-2000)

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Future Prospects Introduction Index issues Social hazard

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Introduction An expanding number of portfolio supervisors may find timberland as a speculation: Asset assignment techniques are in vogue Timberland takes into account considerable portfolio enhancement Pension assets will presumably keep on being the chief private financial specialists

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Index Problems The absence of a predictable timberland file is the single greatest obstruction to expanded venture by annuity reserves: Continuous valuing by the market is troublesome because of: Lack of liquidity Timberland is not a trade exchanged item Regional varieties The evaluation based nature of timberland

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Social Risk The timber business considers forestland to be a renewable asset Many earthy people don\'t consider forestland to be a renewable asset The length of reforestation relies on upon the species

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Gold Motivation for gold venture Determinants of the cost of gold The London settle Investing in gold

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Motivation for Gold Investment People regularly purchase gold in light of the security it is required to give amid times of inconvenience A protection strategy against expansion Particularly articulated in Europe A cash without a nation

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Motivation for Gold Investment (cont\'d) Gold can be an alluring venture since: Gold has shown gives back that are disconnected or even inverse to those of the share trading system The relationship between\'s the Philadelphia Stock Exchange\'s gold and silver list and the S&P 500 list since 1986 has been 0.14 The relationship is shaky

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Determinants of the Price of Gold Strength of the U.S. dollar Influenced in terms of professional career parities and protectionism concerns The quality of remote monetary forms Stronger outside monetary forms diminish the estimation of gold measured in the home money for outside financial specialists

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Determinants of the Price of Gold (cont\'d) Inflation and rising oil costs An expansion in the cost of oil raises fears of swelling and an expanded cost for gold International fund vulnerability Investors swing to gold subsequently of mounting obligation, third-world credits, and so forth

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The London Fix The London settle is the cost of gold that mirrors the relative purchase and offer requests that have been set with part firms of the London Gold Market The settle is resolved twice every day at 10:30 a.m. what\'s more, 3:00 p.m. London time

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The London Fix (cont\'d) Gold costs additionally change in light of: Continuous trade exchanging Economic news Political news

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Investing in Gold Bullion Gold endorsements Shares in mining organizations Coins

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Bullion Gold bars are bullion There are distinctive sizes of gold bars (see next slide) Investors can gain littler amounts of gold: 1-ounce bars Nuggets Gold tidy

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Bullion (cont\'d)

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Bullion (cont\'d) Shortcomings of bullion: Subject to burglary No wage efficiency Lack attractiveness

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Gold Certificates Gold authentications are: Obligations of the guarantor to convey gold upon request Issued by banks Registered in your name Readily

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