Market Turmoil ….. just when you thought is was safe to invest in Water!

With the recent turmoil in the markets, optimism has been a commodity in short supply and good investment opportunities as scarce as hens teeth; though this may be changing if you believe Warren Buffets ‘buy now’ call. In the midst of this, two  new water based investment funds were recently launched.

On September 30, 2008, the investment group Calvert launched the Calvert Global Water Fund (CFWAX). This fund is its latest Sustainable and Responsible Investment (SRI) mutual fund, part of a new series of investment portfolios known as Calvert Solution™ Strategies. Calvert have partnered with KBC Asset Management International, Ltd., of Dublin, Ireland, to sub-advise them on the management of this fund. KBC apparently ‘boasts an eight-year track record of strong performance in the global water sector’. Be that as it may, their timing for the launch probably wasn’t great given the stampede out of equities and they have dropped 18% from $15 at the start of October to approximately $12.20 today.
KBC say that they stay on top of the technological issues involved in the water cycle through its outside environmental advisory committee of scientists. Jens Peers, lead portfolio manager of the Calvert Global Water Fund says ‘we believe that no other water asset management group has set up a comparable committee of unbiased experts.”
Another recent development was that Four Winds Capital Management launched the first London listed water fund on July 24th. The fund, which is referred to as the Aqua Resources Fund was launched on the London Stock Exchange and will invest in water related assets in areas such as infrastructure, technology, recycling, treatment, distribution and water to energy, mainly by taking direct stakes in unquoted companies and projects. The investments must be at least 60% involved in water activities.

Aqua Resources could have done with some help on their website however, it really isn’t very inspiring, it doesn’t have very much meat to it and contains platitudes such as ‘The Company intends to implement its investment policy via its investment strategy. Using global research and sourcing, the Company intends to build a portfolio focused on investments that offer water-related returns.’ Yawn!

However one thing which differentiates Four Winds from other water funds is that they are focused on unquoted assets. This enables them to access a broader base of investments and go after small cap, pure plays, in the water sector. Most other water funds focus on public equity investments with significant non water business activities, e.g. Nestle and General Electric. Leonora Walters provides some good commentary on this at the Investegate.

Despite all the long term positive signs and reasons to invest in water, this didn’t however stop a number of water indexes from taking a hammering in the past few weeks, the ISE-B&S Water Index (^HHO) is down approximately 30% since the start of August and the Global Water Intelligence (GWI) Global Water Index was down 9.9% between 10th August and 19th September 2008. So it seems like in the old movie, when people hear the scary music they still go running for the beach. 

Paul O’Callaghan is the founding CEO of the Clean Tech development consultancy O2 Environmental. He lectures on Environmental Protection technology at Kwantlen University College is a Director with Ionic Water Technologies and an industry expert reviewer for Sustainable Development Technology Canada.