Important caveat: Water investing is tough.
From Bloomberg via the Spokane (WA) Spokesman-Review, October 7:
Inside the world’s biggest asset manager, an investment strategy is being fine-tuned based on a bet that the rich world will increasingly face a lack of clean water.
“Historically, we often thought of water as being a developing-country problem, but it goes much deeper than that,” Omar Moufti, product strategist for thematic and sector exchange-traded funds at BlackRock Inc., said in an interview.
Moufti said it’s hard to overstate the long-term risks tied to water scarcity. He also said that “more severe and frequent droughts and floods across the globe have highlighted” how urgent the threat is.
Britain’s Victorian-era water works buckled under the pressure of floods in recent months, leaving the U.K. to deal with sewage spewing into its clean water. In France, over 100 municipalities were without drinking water over the summer, leading the government to ban farmers from irrigating their crops.
In central Europe, drought left the Danube and Rhine rivers almost unnavigable, while the Po in Italy dried up. In the U.S., regional restrictions were enforced on the amount of water municipalities could pump, as water levels in key reservoirs dropped to record lows. And in states such as Mississippi, locals lost access to clean water altogether.
Scientists predict that extreme weather events behind such disruptions will become more frequent and intense.
“We need to mitigate those risks,” Moufti said.
The BlackRock fund that Moufti helped design – the iShares Global Water ETF (ticker DH20@LN) – invests in everything from water utilities and pump manufacturers to companies that improve water efficiency. The top five holdings in the $2 billion exchange-traded fund include American Water Works, Xylem, Essential Utilities, Ferguson and Geberit. Moufti said the fund reflects the growing concerns about water scarcity in the world’s richest economies – and it’s a danger that may not be fully priced into the market.
It’s about “investing in water equipment like pumps, or improving piping to reduce water losses or enhancing waste water treatment,” Moufti said.
So far this year, the BlackRock ETF has dropped 28%, slightly less than the S&P Global Water Net Total Return Index. The fund advanced at an annual rate of 8.3% over the past 10 years....
....MUCH MORE
From a 2015 post:A Look At A Second Water Focused Hedge Fund
Before we get to the story about Water Asset Management at I'll repeat the introduction to our 2014 post on Summit Global Management "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"....
If interested see also:
Previously in H2OhOh:
Aug. 2012
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
