Why Water Will Soon Become More Valuable Than Oil

July 31st, 2010
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Contributed by: The Mad Hedge Fund Trader
If you think that the upcoming energy shortage is going to be bad, it will pale in comparison to the next water crisis, so investment in fresh water infrastructure is going to be a recurring long term investment theme. One theory about the endless wars in the Middle East since 1918 is that they have really been over water rights. Although Earth is often referred to as the water planet, only 2.5% is fresh, and three quarters of that is locked up in ice at the North and South poles. In places like China, with a quarter of the world’s population, up to 90% of the fresh water is already polluted, some irretrievably so. Some 18% of the world population lacks access to potable water, and demand is expected to rise by 40% in the next 20 years.

Aquifers in the US, which took nature millennia to create, are approaching exhaustion. While membrane osmosis technologies exist to convert sea water into fresh, they use ten times more energy than current treatment processes, a real problem if you don’t have any, and will easily double the end cost to consumers. While it may take 16 pounds of grain to produce a pound of beef, it takes a staggering 2,416 gallons of water to do the same.

The UN says that $11 billion a year is needed for water infrastructure investment, and $15 billion of last year’s US stimulus package was similarly spent. It says a lot that when I went to the University of California at Berkeley School of Engineering to research this piece, most of the experts in the field had already been retained by major hedge funds! At the top of the shopping list to participate here should be the Claymore S&P Global Water Index ETF (CGW), which has appreciated by 50% since I first brought it up. You can also visit the PowerShares Water Resource Portfolio (PHO), the First Trust ISE Water Index Fund (FIW), or the individual stocks Veolia Environment (VE), Tetra-Tech (TTEK), and Pentair (PNR). Who has the world’s greatest per capita water resources? Siberia, which could become a major exporter of H2O to China in the decades to come.

Editors Note: Investors in HedgeTracker’s hedge fund directory that have strategies focused on the water sector include: sustainability and green focused Winslow Management Company, Brennan Investment Partners, and Baldwin Brothers Inc. Hedge fund strategies in the space include Perella Weinberg Partners’ Water and Clean Technology and Earth Capital Partners.

A recent launch in the water infrastructure space is private equity investor Tiger Infrastructure Partners. The firm was founded last year by Emil Henry, Jr. with backing from Julian Robertson's Tiger Management. Beyond the water sector, Tiger Infrastructure Partners also invests in the energy and transport industries.
For Detailed Investor Profiles on these Investors, click below:
Brennan Investment Partners
Perella Weinberg Partners
Tiger Infrastructure Partners
Tiger Management
Related People: Adam Emmert; Alessandro Boninsegna; Alex Robertson; Bob Boldt; Bob Boldt; Christopher Bittman; Dan Arbess; Daniel Aboyan; Emil Henry, Jr.; Emile Westergaard; Geoffrey R. Morrissett; John Townsend; Joseph Perella; Joseph R. Perella; Julian Robertson; Julian Robertson; Leanne Bell; Marc Blair; Pascal Casavecchia; Peter Weinberg; Shirley Eckman; Terry Meguid; William S. Brennan
Related Entities: Kinetics Water Infrastructure Fund ; Tiger Asia; Tiger Consumer; Tiger Global; Tiger Management LLC; Tiger Shark Management; Tiger Veda; Brennan Investment Partners; Perella Weinberg Agility Funds; Perella Weinberg Aileron Hedge Funds; Perella Weinberg Partners Oasis; Perella Weinberg Xerion Capital; Tiger Fund *; Tiger Infrastructure Partners; Tiger Jaguar Fund*; Tiger Management; Tiger Management Corp; Tiger Management LP; Tiger Puma*; University of Colorado Foundation
Related Article Tags: Green, Socially Responsible, ESG and Sustainable Investmenting Hedge Fund News; Hedge Fund Resources and Featured Partner News


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