The U.S. housing market is at the beginning of a sustained recovery in the long term

Christophe Butz, co -manager of Pictet Timbre , graduated from the Swiss Federal Institute of Technology in Zurich with a master's degree in Forest Engineering . He joined Pictet Asset Management in 2002 as an expert in sustainability. Previously he was the deputy head of sustainability research at Bank Sarasin & Cie . Butz is also the co-founder and partner of an engineering consultancy specializing in climate protection projects . It is a certified International Analyst ( CIIA ) Investment and has an ICSC / AZEK diploma.

The Pictet Timber fund seeks capital growth by investing at least two thirds of its total assets in a diversified portfolio of stocks of companies engaged in financing , planting and management of forests and forest areas and / or treatment , production and distribution of timber and other services and products from wood .

At what point in the economic cycle is believed to USA today?
In terms of U.S. housing market is at the beginning of a sustained long-term recovery . In fact we have seen that housing starts has already exceeded one million units in annual terms for the first time in several years . So while we are still at the beginning , this is encouraging and is likely to see several years of growth , returning to the historical norm of 1.5 million housing starts per year , which means business opportunities and benefits business in companies that are part of our background.

How are the prices of wood formed?
Prices of wood make a "complex animal" . For the most part the price is local, it is very expensive to ship and move the wood. So the price depends on the availability and distance from the forest , the proximity of the wood fiber factories and customers.
But there are also some world trade , which takes place on the Pacific coast of northeastern USA and that affects prices because China is importing more and more of that region. To this recovery housing sector in the U.S. , which also promotes rising timber prices is added.

What types of companies included?
We include a variety of portfolio companies . The most prominent , with greater weight in the portfolio, have orientation and long-term objectives coincide with those of the background , in terms of perfect alignment with respect to access to the base of the timber resource . These are large owners of timberland in the U.S., as Weyerhouser , Plum Creek , second and first in the country . Other companies structured as forest owners , including Potlatch or Rayoneir . We also include companies processing wood products for building structures and panels, as Louisiana Pacific , Camphor or Canadian West Fraser, the largest producer of wooden boards in the world. To this more defensive actions , consumer-oriented , as the Swedish SCA , a leading hygiene products or Clear Water is also added . So the background is quite diversified across companies , with exposure to different segments.

"Housing in the U.S., China and diapers have one thing in common ... "
Yes, it is to be noted that Pictet Timber is not an exotic niche but a globally diversified product actions . Geographically close to 60 % of the exposure is in North America , 25% to emerging markets and the rest of Europe and Asia developed . Using wood as a renewable resource and material, it is possible to participate in different market cycles and market factors. It is the case of most currently influential factor , the recovery of the housing market in the U.S.. To this the consumer segment in products made from wood pulp , which is used for hygiene products is added . The cyclic part is probably the segment of packaging for transportation that is produced , which is associated with the economic recovery. To this packaging for consumer products of daily use, more defensive segment is added. So the whole economy is accessible using wood as a material and resource.

Which countries have more weight?
The largest market in terms of production and consumption remain USA, North America together . Hence the fund is predominantly exposed to actions in the region, where listed companies that own forests in those markets. But , of course , China is increasingly important , a change from ten years ago , when the country was virtually nonexistent . In fact then no wood slats out the Pacific coast of North America to China. Now up to 30 % of the wood harvested by some of the owners of forests in the region goes to China. This increased demand is pushing up prices of wood in North America.

What is the fund's performance ?
We are very happy with the results since launch in 2008 and last year with an increase of 30 % compared to 15 % of the global MSCI World. The result is still good this year , although there has been some correction due to fluctuations and volatility of the price of timber in the U.S..
We believe that the potential of the background still stands, given the recovery of the housing market in the U.S., China and push supply constraints Canada. The country traditionally exported wooden planks and U.S. housing , but on this occasion it will not be possible due to an epidemic that has affected their forests. Demand from China , which did not exist ten years ago , the recovery of the housing market in the U.S. and limited offer : So the ingredients for a super- cycle is given.