Christoph BUTZ, portfolio manager of the Pictet-Timber fund, gives an update on the timber theme and the prospects for the coming months.

As a reminder, Pictet-Timber invests in companies active in the sustainable wood value chain.

This includes companies financing, planting, and managing forests as well as the production and distribu- tion of wood for construction and other services and products derived from wood. We focus on companies that sustainably manage their forests, therefore ensuring that trees are replanted, nurtured, and allowed to regrow to capture CO2 and help to maintain biodiversity. The fund was awarded the "Towards Sustainability" label and is compliant with Article 9 of the SFDR Regulation.

Performance

The fund posted a year-to-date performance net of management fees of -3.39% (I EUR share class), outperforming the MSCI World All Countries index (-5.88%).

Our strategy reached a low point in 2018, when the US housing recovery slowed sharply and almost all of our underlying markets (pulp, lumber and packaging paper) underperformed simultaneously. Starting in 2019, our strategy recovered and significantly outperformed the market in 2020 and 2021. 2021 was not a straight line. The year started with a strong performance followed by a consolidation in the 2nd and the 3rd quarter followed by a solid performance in the 4th quarter to end the year strongly.

The beginning of 2022 is also volatile. While our “value” companies, which make up the majority of our fund, benefited from the rapid rise in interest rates, U.S. homebuilders were hit by rising mortgage rates. U.S. Homebuilders represent less than 10% of the portfolio, but the strong underperformance of this segment has limited our outperformance. Similarly, companies in the Hygiene segment which have not yet been able to raise prices sufficiently to offset cost inflation, have detracted from performance.