Investment manager Blue Sky Water Partners (BSWP) has launched a product that provides exposure to the Australian water rights market.
The Blue Sky Water Fund is targeting financial planners, high net worth clients, self-managed superannuation funds and sophisticated investors and aims to raise $50 million by 31 July 2011.
When an investor purchases a water right, they are given access to a share of water from a defined resource such as a river or underground aquifer each year, according to BSWP managing director Kim Morison.
That volume of water could then be on-sold to agricultural, urban and commercial water users to generate a yield. The water entitlement itself could be traded for a capital gain over time.
Historically water rights have achieved annual capital gains of 8 per cent to 15 per cent depending on which entitlement type and which region, he said.
The fund will aim to be diversified across different states, rivers and different entitlement types.
“We have seen a growing appetite for water as an investment and we believe most Australians will have some exposure to Australian water in their investment portfolios or superannuation fund within 10 to 20 years,” Morison said.
“Australian water entitlements offer the prospect of significant long-term capital growth, driven by the growing demand for water as input to food, fuel and fibre production and reflecting the scarcity of water entitlements.”
“In addition, we expect to provide investors with reliable ongoing yields from the sale of annual water allocations, a higher degree of liquidity than direct farmland investments, and a return profile that is less correlated with traditional financial markets,” he said.
Morison estimated that the water entitlement market is about $25 billion in size.
