This post includes themes from the (virtual) Applied Forest Finance course on March 31^st, 2026. Early registration ends March 17^th*

Introduction

Markets are nervous, uneven, and uncertain as stocks tumble this morning with the U.S. at war with Iran. And yet, over the past year up to yesterday, the S&P 500 gained nearly 18%, and the Dow Jones Industrial Average rose over 13%. The topline results in equity markets camouflage the volatility and chaos associated with the individual sectors and decision-making underneath. While firms like NVIDIA (+57%) that make chips for AI (and… defense applications) and Eli Lilly (+12%) that make GLP-1 weight-loss drugs (to avoid eating chips) surge, Warren Buffett’s holding company Berkshire Hathaway is down 6% (for reasons beyond his announced retirement), as are forest industry stalwarts such as Weyerhaeuser (-20%) and West Fraser (-13%).

Yes, capital markets always include winners and losers. However, recent measures of volatility and uncertainty associated with debt and derivatives highlight skittishness and fear as investment teams digest the implications of federal policies. As noted by The Economist (February 22, 2026), “Markets are churning furiously beneath the surface,” complicating efforts to evaluate risk and performance. What can analysts do, in the humble world of forestry, to benchmark investment performance when the outside world drops the bookmark and forgets the page?

Benchmarking Timberlands

This is not a new issue; we have been here before. For alternative investments such as timberlands, benchmarks often serve as incomplete indicators of performance, a challenge described years ago in The Wall Street Journal (“Benchmarking Alternative Funds an Inexact Science,” April 10, 2014). The article noted how alternative-fund benchmarks function well as a “guidepost” but not as true metrics for individual investments. This can complicate matters for institutions seeking guidance when making investment and asset manager decisions.

Therefore, we use what we have the best way we can. The National Council of Real Estate Investment Fiduciaries (NCREIF; pronounced “nay-creef”) publishes the most widely referenced indices for private U.S. timberland investments managed by timberland investment management organizations (TIMOs) on behalf of institutions. In previous research on benchmarking, (“Best Practices and Existing Indices for Privately Held Timber Assets”, Q3 2015 Forisk Research Quarterly), Forisk detailed several criteria for evaluating timberland indices such as NCREIF, which resulted in four (4) recommendations for investors and managers who want the maximal use of NCREIF without abusing its capabilities.

First, use annualized returns for benchmarking purposes. NCREIF reports timberland investment results quarterly. However, inconsistencies in periodic appraisals and the lagging implications associated with appraisal-based real estate indices (such as NCREIF) generally question the use of quarterly returns for performance analysis. Simply, the annual appreciation and income measures have proved useful, helpful, and robust for timberland investment tracking.

Second, use NCREIF primarily as a U.S. National benchmark; avoid using regional measures outside of the South (or Northwest). NCREIF reports timberland investment returns in four U.S. regions: South, Northwest, Lake States, and Northeast. However, NCREIF’s tracking is heavily weighted to the South, which currently accounts for two-thirds of the acres in the index.

Third, avoid using NCREIF returns as a stand-alone measure of timberland manager performance. NCREIF does a better job of summarizing returns through economic cycles from professionally managed, industrial timberlands than it does comparing manager skills, cost effectiveness, or local timber markets. We suggest supplementing the use of NCREIF with assessments of communication skills, performance reliability, and annual variance analysis of pro-forma budgets. This could include third party benchmarking of forest management costs. The bottom line is, does your manager (or lawyer, accountant, consultant, etc.) do what they said they were going to do when they said they were going to do it? Also, clarify the day-to-day realities of what the manager accomplished on your behalf while dealing with exogenous policies and wars outside of their control.

Finally, use weighted averages of the NCREIF regional indices that match your portfolio composition and timeframe. NCREIF data tracks how each of the four regions covered vary in level and direction of returns over time. Fortunately, NCREIF reports the data for each region, allowing investors and managers to try and match the distribution of one’s timberland acres by region in the investment portfolio as best as possible.

Conclusions

The recommendations here provide simple guidance on how to use NCREIF appropriately and to maximum benefit, regardless of the outside market conditions. In sum, when using the NCREIF Timberland Index for benchmarking purposes, (1) use the annualized returns; (2) prioritize NCREIF as a national, rather than regional, benchmark; (3) avoid NCREIF as a standalone measure of timberland manager performance; and (4) use weighted averages of the regional indices to better approximate your actual portfolio.

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*Class participants receive two updated books on Forest Finance

Forest Finance Simplified, 7^th Edition

This book distills forest finance themes into a question-and-answer format for those who want an accessible reference for analyzing timber investments and making forest management decisions. The new 7th Edition includes additional content on selecting financial criteria, benchmarking timberland investments, and evaluating financial statements.

Why read Forest Finance Simplified? (19 second video)

Aunt Fanny Learns Forestry: Managing Timberland as an Investment

This 2^nd Edition, with drawings by taxidermist Max Lang and a cover by Heather Clark, follows Aunt Fanny as she gets to know her recently inherited forest, learns investment concepts, and implements a forest management plan. The book serves any investor interested in a tight and entertaining tutorial for prioritizing what matters when managing their timber as an investment.