September 2014
A Look at the World's First Water-focused Hedge Fund
Since the first Earth Day in April 1970 and more importantly since the establishment of the EPA in December of that year, folks have been trying to make money out of water in the U.S..
Put simply, the returns have not been market-beating.
Because so much of the opportunity was my-little-crony stuff, at the whim of politicians, there was no consistency of growth at a time when other portfolio investments offered very competitive comparisons.
The alternative was to own the cash flow, private equity style, but unless one felt a passion for grit chambers and sludge pans it was pretty pedestrian, utility type ROI.
In fact the most reliable water investment in the U.S. has probably been York Water Company of York PA.
They've been paying dividends for 199 consecutive years and just announced their 575th divi.
The announcement carries the boilerplate "This release contains forward-looking statements".
Anyway, here's a piece we've been sitting on since January, from Mother Jones:
...The following was published by arrangement with The Penguin Press, a member of Penguin Group (USA) LLC, a Penguin Random House Company. Copyright McKenzie Funk, 2014.****
Where water Runs when it runs out
The offices of the world's first water-focused hedge fund overlook a parking lot in a subdivided landscape developers call the Golden Triangle. The neighborhood gets its water from the Alvarado Water Treatment Plant, run by San Diego's Public Utilities Department, which gets its water from the San Diego County Water Authority, which gets its water from the larger Los Angeles–dominated Metropolitan Water District, which gets much of its water—in greater proportions during California's droughts—from the 242-mile Colorado River Aqueduct, which gets its water from a reservoir straddling the Arizona border, Lake Havasu, which gets its water from the 1,400-mile Colorado River, which gets its dwindling water from thousands of streams, snowfields, lakes, and springs in a drainage basin covering nearly 250,000 square miles across seven western states. Without imported water, the 2.7-million-person San Diego metropolis, like much of Southern California, would be no more capable of supporting people than the coastal desert it once was. During my visit, at the height of a hot summer in 2010, I got my water one morning from a secretary, who handed me a tiny plastic bottle—Poland Spring, was it?—from the fridge.
Aug. 2012The man I'd come to meet was John Dickerson, the founder and CEO of Summit Global Management, a former CIA analyst, and the buyer of billions of gallons of water in two vital, desiccating river systems: the Colorado and Australia's Murray-Darling. Both systems had recently experienced severe droughts that scientists tied to climate change. Financial managers like Dickerson, meanwhile, had experienced the opposite: a flood of money. Summit had launched its first water fund in 1999, but "for a long time," he told me, "I was a voice in the wilderness. We couldn't get anybody to buy our fund. Then came Al Gore and his stuff, the whole global-warming thing, droughts. Water became the go-to idea."...MORE
It's So Hard to Find a Decent Bet on Water (investment vehicles)
Update below.
Original post:
Water has confounded smarter people than me.
Enron's adventure in H2O is a cautionary tale, they bought Wessex Water in England, bought water concessions in Argentina and had a long term contract in Cancun.
Enron partially spun out the water sub, Azurix at $19.00. Within 18 months it was trading at $3.50 where Enron tendered for the 34% of the company that the public owned.
Not a very sweet deal for anyone involved. Water is tough business.
And, of course, Enron being Enron, they bid 100% more than any one else in the business to get the Argentina deal to have some big pre-IPO news.
From FT Alphaville:May 2013
In search of liquid water (investment vehicles)
This guest post was submitted by Jason Abbruzzese of FT.com.
A little more than a year ago, Citi chief economist Willem Buiter said water was on its way to becoming “the single most important physical-commodity based asset class, dwarfing oil, copper, agricultural commodities and precious metals”.
While we’re not quite there yet...MORE
Swiss Private Bank Pictet Making Money in the Water Biz (XYL; DHR)
July 2013
"Can Powdered Water Cure Droughts?"
October 2010
Muni's: "Water Scarcity a Bond Risk, Study Warns"
April 2015
A Look At A Second Water Focused Hedge Fund
From Barron's:
Water Asset Management: Hunting Liquid Assets
Water Asset Management managers Disque Deane Jr., Matt Diserio, and Marc Robert are betting that water prices will float higher still.
Water wasn’t an obvious investment theme when Matt Diserio and Disque Deane Jr. launched their hedge fund 10 years ago. Now, every day brings news of a water shortage or drought. So have the water stocks targeted by their Manhattan-based Water Asset Management enjoyed a panicky rerating?There are many more, use the 'search blog' box if interested.
Not yet. Drought-parched headlines still get upstaged by the latest dot-com initial public offering, so water remains mispriced by consumers and investors. That’s good for the half-billion dollars that Water Asset has in an equity hedge fund and a newer long-only fund focused on regulated water services, water resources, and the suppliers of pipes, meters, and treatment technologies. Upside remains.
“It is an old industry,” says Diserio, who manages the firm’s stock portfolio, “but it is just becoming a recognized asset class.”
Water investing’s upside is ensured by the urgency of our water needs and the fact that this resource remains very cheap in an absolute sense—compared with natural resources like timber or farmland, oil or gold. The average American family’s water bill is under $40 a month, notes Deane, giving the industry room to charge more to cover hundreds of billions of dollars in deferred maintenance and upgrading....MORE
