Harvard endowment fund keen on natural resources

Harvard Management Company (HMC), the manager of Harvard University's endowment and owner of plantation forest assets in New Zealand, is talking up natural resources as an area of investment in its latest report.

The manager of money for the world's wealthiest university had a tumultuous year in 2009 but has reported a "return to normalisation" in its fiscal 2010 year. Harvard's endowment returned 11 percent in the year to June 30.

HMC is the majority owner of Kaingaroa Timberlands, the second largest owner of plantation forest assets in New Zealand behind US fund manager Hancock Natural Resources Group. NZ Superannuation Fund owns 40 percent of Kaingaroa Timberlands and it is its largest single investment.

HMC first emerged as a forest owner in New Zealand when it was run by Jack Meyer, a legendary investment figure who left HMC in 2005.

Under current chief executive Jane Mendillo investment is overseen by two senior executives, Stephen Blyth and Andy Wiltshire.

Mr Wiltshire is a New Zealander who started his career with the New Zealand Forest Service after attending Canterbury University's forestry school.

In its latest report, HMC says 14 percent of its portfolio is now invested in commodities, up from 13 percent in 2005 and 6 percent in 1995.

The report said real estate values continued to correct downward during the year, but HMC found the real estate sector to be "most interesting in terms of current and future opportunities".

"Another area where we are currently active is natural resources, a relatively new asset class that was pioneered by HMC," the company said.

While nominal returns from natural resources investments were relatively low this year the company outperformed the market benchmark significantly, HMC said.

"We believe natural resources is a core strength in our portfolio, offering inflation protection, cash flow and long-term growth."

HMC has total assets of $US27.4 billion ($NZ37.4 billion), still down from $US36.9 billion before the global financial crisis. The NZ Superfund has assets worth $NZ16.4 billion.

Their investment in Kaingaroa is in the tree crop rather than the underlying land, which is owned by iwi.

United States-based GMO Renewable Resources is the investment adviser for both Harvard and the Guardians, and Rotorua-based Timberlands Ltd manages the forest, according to the 2009 NZ Superfund annual report.

Kaingaroa is an estate of about 170,000 hectares of cutting rights to plantation forest located in the Central North Island. The bulk of the timber is radiata pine, with a small quantity of douglas fir. The combination of high rates of growth, flat topography, and close proximity to numerous timber mills plus the Port of Tauranga make Kaingaroa one of the premier timber estates in the world.


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