Water is a new asset class that will become an integral part of high net worth and institutional portfolios, according to William S. Leavitt, president of Leavitt Capital Management.
Speaking at a private family office conference in Singapore, Leavitt said the global water crisis is creating a mass of involuntary buyers, resulting in a tremendous, uncorrelated investment opportunity.
“Global demand for water has been rising for a century,” Leavitt said. “The world population is expected to grow 50 per cent in the next 40 years, WHO estimates 66 per cent of the world will live in water stressed areas by 2025 and while 70 per cent of the planet is water, only 0.25 per cent is available to drink.
“It’s a very serious issue, whether or not people realise it. Populations and global demand are increasing rapidly, which exasperates the problems with infrastructure, pollution, food production and so forth.”
Approximately 40 per cent of China’s water supply is unfit to drink due to pollution, while 300 million Chinese lack access to safe water. Major US cities lose more than 40 per cent of their drinking water due to leaks in century-old infrastructure. Furthermore, those leaks create safety risks by letting contaminants into the water supply.
“Male fish are developing female organs and laying eggs,” said Leavitt. “This is caused by people taking medications and passing the waste into the water.”
Leavitt identified several major themes his investment team is focusing on. The most opportunistic in his view are pollution and technology solutions, water rights, infrastructure, desalination and remediation.
Identifying the themes is not the difficult part, according to Leavitt. Finding skilled managers that can capitalise on those themes is.
“In terms of viewing water as an investment, let alone a separate asset class, we are in the very early stages. Consequently, the most difficult task is finding skilled managers in this space with a proven track record,” he said. “We know thematically these are the areas to be in, but it has taken four years of combing the earth to find the right people.”