AIMCo Snatches Aussie Timber

(January 28, 2011) — The  Alberta Investment Management Corporation (AIMCo), the corporation created to manage Alberta’s pension and sovereign wealth capital, has teamed up with a Sydney-based forest management firm for a $417 million acquisition of Australian timberlands. 

Representing one of the largest forestry estate transactions in Australia, the deal signals the fund manager’s pursuit of distressed assets in the fields of food, energy, and raw materials. It reflects a trend toward institutional ownership of Australia’s plantation forestry, which fosters consolidation of the industry along with competition on a global scale, David Brand, managing director of New Forests, indicated in a statement describing terms of the deal.

“AIMCo wants to capitalize on growing world demand for timber and agricultural products,” Leo de Bever, the CEO of the Canadian public-sector pension fund, said in a release. “We are delighted to be part of this extraordinary opportunity to assist in the development of these Australian assets, at an attractive return to AIMCo’s clients,” said de Bever, whose organization manages about $70 billion in public pensions and other government funds for the Western Canadian province of Alberta.

AIMCo and a fund run by Australia’s New Forests Pty Ltd, a timber investment management firm specializing in sustainable forestry investments, are purchasing the timberland assets of Great Southern Plantations. AIMCo is funding about 80% of the deal, which encompasses more than 965 square miles of land in forestry and agricultural regions in six states.

“As a local investment manager specialized in timberland management, New Forests has the expertise and capacity to manage this diverse and valuable forestry estate on a sustainable and commercial basis,” Brand stated.

In another trend in corporate finance, AIMCO has mirrored the move by other big pension funds to invest directly in infrastructure assets as opposed to relying on third-party funds. Earlier this month, in an effort to locate stable long-term investment vehicles with decent yields, the fund manager agreed to buy a 50% stake in Autopista Central, a motorway in Santiago, Chile. AimCo’s de Bever, often regarded as the king of infrastructure investment, told the Financial Times that such deals made sense because some infrastructure funds still carry 2-and-20 style performance fees (2% of assets and 20% of profits), noting that pensions have thus moved away from investing through third-party investing vehicles largely because of the fees involved.