This paper quantifies the diversification potential of timberland investments in a mean-variance framework. The starting point is a broad set of benchmark assets represented by various indexes. Including publicly traded timberland investments from the US and Canada in the portfolio does not significantly increase mean-variance efficiency. At first sight, US private equity timberland seems to improve the mean-variance frontier, even if the portfolio already contains a forestry and paper equity index. Adding privately held timberland to the investment set increases the risk-adjusted excess return on the tangency portfolio with about 10 bp per quarter. However, after removing the appraisal smoothing bias from the raw timberland data, there is much less evidence that private equity timberland investments increase mean-variance efficiency. Even under mild assumptions regarding the appraisal smoothing bias, the inclusion of the unsmoothed Timberland Index increases the risk-adjusted excess return on the tangency portfolio with only 1 bp per quarter.