18 APR 07

IT’S often said that future wars will be fought over water, not oil, and a local investment company is banking on making money by tapping into investment opportunities in the $460 billion global water market.

MFS Aqua Managers, a wholly owned subsidiary of the stock exchange listed MFS, today launched the MFS Water Fund, Australia’s first globally diversified water fund.

MFS Aqua Managers managing director Richard Lourey said the fund aimed to take advantage of prospects in the global market for an “irreplaceable” resource that is rising in value.

He said the price of water in Australia had risen at three times the rate of inflation in the last 12 months.

While the fund couldn’t fix that problem, it could provide “an investment opportunity that captures exactly the same investment economics that is driving … water bills higher.”

“This is not this week’s story, or next week’s story or even this year’s or decade’s story, this is possibly this century’s story,” Mr Lourey said.

“When a resource becomes scarce there is a rise both in the value of the resource itself and in the value of the businesses associated with the development of that resource.”

Mr Lourey said water was even more compelling because, unlike oil, there was no substitute.

The fund, aimed at “mum and dad” retail investors, will seek investments in water-related business including utilities, infrastructure and technology companies and the owners of water assets and water rights.

By way of example, Mr Lourey said the Chinese government had identified water shortage as the number one issue confronting sustainable growth and had allocated $US125 billion to resolve the crisis.

He said the money would go to private sector companies providing solutions, and it was those type of companies the MFS Water Fund would invest in.

“We believe that the returns those companies will generate means our investors will enjoy excellent, long-term, capital growth, low-risk defensive growth returns,” Mr Lourey said.

He said he hoped the fund would generate “double-digit” returns for investors.

Mr Lourey said Australian farmers concerned about the commodification of water “shouldn’t be scared of the MFS Water Fund”.

He said the fund wouldn’t speculate in the price of water on the open market.

“But I believe inevitably the price of water is going to rise … It’s a global supply and demand issue,” he said.

“So what I would say (to farmers) is … the MFS Water Fund represents an opportunity for you to invest in a product that will mitigate or hedge your risk associated with higher water prices.”

The University of Adelaide’s Professor of Water Economics and Management, Mike Young, said the growing global water market could be part of the answer to the globe’s water woes.

He said it would not concentrate water ownership in the hands of a few large corporations, as many smaller farmers feared.

“All the signs suggest that’s not going to happen,” Professor Young said.

“If you look at other areas, like fishing quotas, they are still held by fishing people, not big corporations.”

Professor Young said water in Australia was currently managed by governments, but what was really needed was private investment, particularly in infrastructure.

“A lot of people keep saying, why can’t I contribute,” he said. “People are looking for ways to be part of the solution.”

He said if a water fund performed well, it would do so because the businesses working to solve the crisis were succeeding.

However, Mr Lourey wasn’t losing sight of the main aim of the MFS Water Fund.

At the end of the day, he said, it wasn’t a green fund or an environmental fund, but  “purely a money-making fund”.

The fund has a minimum initial investment of A$10,000 and the first allotment will be on June 1.

- AAP