Blue investing?
by Dan Crawford
Institutional Investor reminds us of a vital area not in the news, but drawing enough committed money to attract even hedge funds.
Angry Bear has carried posts on the 1989 experiment with privatization of water utilities in Britain, the strange world of WTO rules regarding water supply, ownership, and provision of sewerage, and the big companies involved in development of water (European owned)resources. Ignored in the US media for a few years now that US drought (2007) doesn’t demand attention, the issues will be coming back to domestic attention as money chases profits.
Since water is a central part of living, perhaps we will pay attention again.
The world is getting thirstier. The World Bank estimates that global water consumption will increase by 50 percent over the next 30 years. But the planet has no more water today than it did after the Big Bang, and as with any commodity that appears to be running out, this resource is attracting new interest from investors.
No fewer than eight exchange-traded funds now specialize in water-related investments. The endowments of Harvard University and Duke University have both begun to focus on water. And last year the California Public Employees’ Retirement System committed $260 million to the venture capital firm of one of Sun Microsystems’ co-founders, Vinod Khosla. The firm seeks out emerging water technologies, among other cutting-edge investments.
The market worldwide in stocks revolving around water infrastructure alone — everything from pipes, valves and filters to desalination systems — is thought to be between $550 billion and $700 billion (about $135 billion of that is in the U.S.). William Brennan, a portfolio manager for Summit Global Management, a $450 million-in-assets San Diego–based firm that has a water hedge fund as well as a water-rights fund — a private investment pool that invests in water rights — estimates that the public market could easily grow to $1 trillion.
Institutional investors have so far poured $25 billion into water-linked stocks, typically those of water utilities and water-treatment plants. The water industry’s need for funding is so great that it ranks as the fourth most capital-intensive business globally. But U.S. investors are relative newcomers to so-called blue investing.
The privitization of water — and opposition by ordinary Bolivians — was key to the overturning of the old Bolivian state and the establishment of a new government and a new constitution. Investing in water has some risks. People get really angry when they can’t afford to drink H2O.
Not real sure where this is headed. Water as an investment started becoming the rage around 2004. When people were still trying to discover what the next big thing would be to follow the tech bubble bust. Note that most of it in the US is buying up water rights, not developing supply. So it’s like the land investors that buy land on the outskirts of a city and hold for a decade or two waiting for the price to go up.
But U.S. investors are relative newcomers to so-called blue investing.
http://www.gao.gov/products/GAO-10-957
A lot of firms invest in the water industry, I’ve read. It’s good for firms with that kind of money to put that money to somewhat good use and even contribute to charitable organizations. I know Highfields Capital Management (co-founded by Richard Grubman) provides services to a ton of public and private charitable foundations, school endowments, etc.
http://investing.businessweek.com/research/stocks/private/person.asp?personId=661213&privcapId=975215&previousCapId=428740&previousTitle=CapitalSource%20Inc.