Blue Gold

Water is critically scarce and although it may cover over 2/3 of the earth's surface there is only 1% available for drinking, and this percentage is shrinking at an alarming rate due to population growth, industrialization, pollution and climate change. It has been forecast that by the year 2025 two thirds of the world population will be without safe drinking water and basic sanitation services as demand is forecast to continue to grow as shown in Figure 1 with many of the poorer countries being hit the hardest as illustrated by Figure 2.

Figure 1. Global Water Consumption 1990-2025

Figure 2: Global Water Stress Areas

A 2006 United Nations report focused on issues of governance at the core of the water crisis, stated"There is enough water for everyone" and "Water insufficiency is often due to mismanagement, corruption, lack of appropriate institutions, bureaucratic inertia and a shortage of investment in both human capacity and physical infrastructure".

I suggest you watch this video titled, CNN World Water Crisis, discussing the current global problems and re-iterating the statement by the UN that it will be human commitment and will, that will ultimately lead us through this crisis. It also touches on the growing concern of water wars and the potential for conflicts to develop if action is not taken.

There are a growing number of funds who have taken advantage of the opportunities inherent in the water shortage crisis as the demand for water will continue to grow, fueled by an increasing scarcity due to global warming and the effects of climate change. In the market turmoil investors are increasingly looking to uncorrelated asset classes and water is attracting attention, with one such fund posting very impressive results this year that was brought onto my radar by a colleague who works at the firm. I believe this is indicative of the increasing value and demand that will be placed on investments aimed at sustainable and efficient use of our most precious resource, water.

Sextant’s Water Hedge Fund Up 97.5%
September 23, 2008

While many hedge funds are running aground amidst the market turmoil, one Toronto firm is seeing nothing but clear blue seas.

Sextant Capital Management’s Strategic Global Water Fund Offshore finished August up 9.4%, boosting its year-to-date returns to 97.5%. The fund invests in pure water companies and water-related technologies.

According to founder Otto Spork, China’s demand for commodities coupled with global warming has made water a highly sought-after commodity.

“Presently, over one-third of countries have insufficient water resources and this will expand to two-thirds within the next 10 to 15 years,” wrote Spork, in a letter to investors.

Spork said that the deterioration in the quality of the world’s fresh water supply is accelerating; on a global basis, one in 10 diseases originate from unsafe water. “People are only now beginning to understand the relationship between water shortages and poor quality water and the strength of a nation’s economy and the health of its people,” he said.

And Spork sees no trouble ahead for the water fund, adding that last month’s return was “only the tip of the iceberg.”

See Original Article on Sextant Global Water Fund