In announcing its first entry into the carbon sequestration business, Boston-based Hancock Natural Resource Group (HNRG) strengthens its position as the world's leading forestland investment management organization (FIMO).

With a total of 3.1 million acres (1.3 million hectares) under management, the group's holdings include 405,080 acres (164,000 hectares) in Australia, 61,750 acres (25,000 hectares) in British Columbia, Canada, and 2.6 million acres (1.05 million hectares) in the United States.

HNRG holds and manages forestlands for institutional investors, typically large public and private pension funds, endowments and foundations. Worldwide, institutions account for about US$8 billion in forestland assets, most in the US, which has nearly three quarters of the world's "investable" timber. As the leader, HNRG has about 35 percent of total assets invested in forestlands by institutions, more than twice the market share of the second place competitor.

HNRG also leads the industry in the breadth and depth of its research department, which includes some of the most respected analysts in business. Traditional "TIMOs" - timberland investment management organizations - focus only on timber-related assets in forestlands. FIMOs, in contrast, focus more broadly on carbon sequestration and other environmental benefits including watershed protection and biodiversity enhancements.

HNRG was founded in 1985 by John Hancock Financial Services, which continues to own the group, although it operates semi-autonomously as a subsidiary. The parent company, which is one of the 15 largest insurance and financial service companies in the US, had been a mutually owned company until February 2000 when its shares were offered for sale to the public. Hancock shares now trade on the New York Stock Exchange under the symbol JHF.

John Hancock, over the years, had gained considerable expertise as a lender to forestland owners. In the mid-80s, it became apparent that institutional investors were seeking greater diversification in their real estate and alternative investment portfolios. At the same time, traditional owners of large forest properties - integrated forest products companies for the most part - were beginning to divest their non-strategic forestland holdings.

Integrated forest products companies traditionally held large blocks of forestland as the source of fiber for sawmills or pulp and paper conversion facilities. As the industry became more competitive, and as these companies invested in new, costly production facilities, many began to question the need for committing substantial capital to own forestlands rather than simply buying wood from other owners.

For competitive reasons, they were reluctant to sell timberlands to other integrated forest products companies. So, when financial buyers like John Hancock expressed interest, a new industry was born.

Both HNRG and forestlands as an asset class grew rapidly from a modest beginning. Today, HNRG has 42 client investors in the US, Australia and the Middle East, and has grown its asset base from US$15.8 million in 1985 to US$2.8 billion.

When the organization was formed 15 years ago, only two firms competed for investor dollars in forestland. Today there are 13 TIMOs, but HNRG remains the only FIMO.

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