Browsing by Subject "TIMO"

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  • Mäenpää, Jani (Helsingin yliopisto, 2020)
    The purpose of the study is to research the principal-agent issues in institutional forest asset management industry. This study aims to broaden the understanding of principal-agent issues and show in what kind of forms they could take place in the institutional forest asset management industry. The concepts of institutional investing, forest asset management and theory behind principal-agent problems are presented. This study uses qualitative research methods, with data sourced from secondary sources. Globally, the institutional investors’ asset allocations to forestry have been small as a percentage share of the total assets under management. As forest management needs large resources, the outsourcing of forest asset management could be more cost efficient, if the investor would not be comfortable in investing substantial resources into in-house management capabilities. Outsourcing means long value chain of agents, information asymmetries and possibly conflicting incentive structures. Timber management organizations or TIMOs are usually the key link between institutional investors and timberland. The results would indicate that principal-agent issues could be present in the institutional forest asset management industry. This would partly be due to the highly specialized nature of forest as a natural asset class, which needs special skills that many general institutional investors do not have in-house. Solutions to principal-agent problems could be found from digital solutions that could improve the management of knowledge and reduce the information asymmetries. Further research would be needed to study whether the principal-agent issues are a problem or an opportunity for the institutional investors. In addition, the further research could study whether the institutional investors are already using digital solutions in reducing the information asymmetry risks in outsourced investment decisions. The limitations of this thesis are that results might not be easily generalized. Because previous research in principal-agent issues in forest investing is limited, this research aims to contribute to the academic literature research in the field by broadening the research done on the topic.