WATER FUND OPEN
In October 2015 The Nature Conservancy Australia and Kilter Rural launched the Murray-Darling Basin Balanced Water Fund to provide water security for Australian farming families while protecting culturally significant wetlands that support threatened species. The Fund invests in permanent water rights in the Southern Murray-Darling Basin and allocates those rights in a smart way. When water is scarce and agricultural demand is higher, more water is made available to agriculture. When water is abundant and agricultural demand is lower, more water is allocated to wetlands. It is a win-win, aligning the interests of people and nature.
Operating in the world’s largest water market, the Murray-Darling Basin Balanced Water Fund is the first water investment fund in Australia to address balanced environmental, agricultural, social and financial outcomes. The Fund’s water portfolio is managed by Kilter Rural, one of Australia’s largest water fund managers with over $190 million of water assets under management.
The Fund’s initial capital raise closed on 23 December 2015 having raised $22 million in equity and $5 million in debt. Since then the Fund has:
- Fully deployed available capital
- Generated an operating profit nine months ahead of forecast
- Made two distributions to unitholders, the first was made 12 months ahead of forecast
- Supported its first two environmental watering events, and
- Supported the ongoing development of high value irrigated agriculture.
The Trustee now seeks to make a follow on offer for the purpose of raising additional capital for the Fund. In connection with this offer the Trustee has issued an updated Information Memorandum dated 25 October 2017.
“Water policies in most nations are failing to protect life's most vital resource. This fact is reflected in growing water scarcity and alarming declines in the health of aquatic ecosystems worldwide. More precious than oil, yet routinely wasted, water is arguably the world's most pressing resource issue”
(World Resources Institute. Will there be enough water? 2000)
Why Invest In Water ?
Securing access to sufficient fresh water will be one of the more pressing issues facing humanity in coming decades.
Moreover, water is the key-limiting factor of production in nearly all agricultural systems.
Increasing demand and scarcity will continue to remain as key economic drivers underpinning the water asset market.
Australia’s political stability, strong history of supporting property rights and commitment to improving water trading transparency has formulated one of the most efficient water markets in the world.
These features provide significant strengths for those seeking to invest in Australian water assets.
The Kilter Water Fund is a vehicle through which sophisticated, non-institutional clients access investment opportunities in high quality Australian water entitlements and water allocations in the Southern Murray Darling Basin water market.
What are water assets?
Water Entitlements are perpetual rights to access a share of a defined water resource such as a lake, river system or aquifer. They are issued, regulated and registered by State Governments.
At law the rights of Water Entitlement owners are akin to the owners of land titles. Holders of Water Entitlements are allocated a volume of water each year (Water Allocation) that can be either used or sold to other agricultural, urban or commercial water users.
Water Asset Returns
The total market value of Australian water assets, has been estimated at $25billion. Within this, the most active water markets occur in the southern Murray-Darling Basin (MDB) supported by water assets with an estimated value of $8billion.
The southern MDB region comprising the Murrumbidgee, Murray, Goulburn and Lower Darling rivers provides an interconnected water delivery system spanning three Australian states (SA, NSW and Vic). The system has a very active trade in Water Entitlements and Water Allocations across a diversity of agricultural industries, geography and climatic conditions and is arguably the most sophisticated water market in the world.
Returns from investment in high reliability Water Entitlements from 1993 have generally exceeded returns generated from an investment in a S&P ASX Accumulation Index. The market price of Victorian Goulburn high reliability Water Entitlements over the period from July 1994 to September 2015 has on average increased just under 10% p.a.
Water Investment Experience
The 92GL water entitlement portfolio currently managed by Kilter Rural Water Solutions is sourced from the southern connected Murray Darling Basin (MDB).
Since 2006 Kilter Rural has been delivering yields from water entitlements and allocations through development and deployment of innovative water solutions for irrigators in the MDB.
Investing in water enables investors to access the underlying soft commodities growth thematic without direct exposure to the operational and production risks associated with direct farm ownership.
The Kilter Rural approach has a number of advantages including:
- The ability to lift the overall yield achieved
- The ability to significantly reduce volatility
- Capacity to impact sustainability
- Acts as a hedge against impacts of climate change.