Spotlight on Timber & Forestry ETFs ahead of Fed's rate hike

Chicago lumber futures have risen by more than +11% over the past week and are now trading around $1,300 per thousand board feet, its highest level since June 2021. The surge is attributed to large US home builders building up their stockpiles for the looming spring construction season. According to the Commerce Department, new homes sales in the U.S. jumped by 12% in December from a month earlier as first-time buyers rush to the housing market ahead of an impending interest rate hike.  

Investors can gain exposure to lumber and related industries, through Timber & Forestry ETFs. These Thematic funds are part of the "Natural Resources" investment trend and have received around $38 million of net inflows this year.

Investing in America-domiciled Timber & Forestry ETFs

Investors can gain exposure to the Timber & Forestry theme through Invesco MSCI Global Timber ETF (CUT) and iShares Global Timber & Forestry ETF (WOOD). WOOD is the largest with $328 million in assets under management (AUM). The fund aims to track the S&P Global Timber & Forestry Index and invests in companies that produce forest products, agricultural products, and paper and packaging products. In terms of industry exposure, Paper & Forest Production has the highest share (55.85%), followed by Equity Real Estate Investment Trusts (24.16%), Containers & Packaging (16.6%), and Household Durables (3.12%). The United States has the highest weighting (31.3%). Canada (16.95%), Sweden (15.14%), Finland (10.22%), and Japan (8.81%) come next respectively. The fund's top holdings include West Fraser Timber Ltd. (9.41%), Weyerhauser REIT (9.02%), Svenska Cellulosa (8.48%), Rayonier REIT (7.87%), and PotlatchDeltic (6.68%).

WOOD has a total expense ratio of 0.43% and trades primarily on the NASDAQ. Since its inception on June 24th, 2008, WOOD has generated a cumulative return of +138% (as of January 31st, 2022).

Investing in Europe-domiciled Timber & Forestry ETFs

In Europe, investors can also invest in iShares' WOOD ETF through its European doppelganger the iShares Global Timber & Forestry UCITS ETF (WOOD). The fund has a total expense ratio of 0.65% and trades on multiple European exchanges, including the London Stock Exchange (WOOD, GBP), SIX Swiss Exchange (WOOD, USD), and the Deutsche Börse (IUSB, EUR).

Find and compare over 8,000 ETFs with our free tools:  

• ETF Screener
• ESG Investing
• Thematic Investing

Interested in seeing lists of top-performing ETFs? Check out our new Investing Guides:

• Investing in Gold ETFs
• Investing in Silver ETFs
• Investing in Commodity ETFs
• Investing in Oil ETFs
• Investing in ESG ETFs