Hydro - Environmental legislation = 'massive' market growth potential

From the Telegraph, underlining the investment case here:



"Another commodity that is beginning to make waves among fund managers is water. "Water may soon follow in the footsteps of copper and oil and be traded as a commodity," says Gary Dugan, the chief investment officer of Barclays Wealth Management.

Water is never going to be a cyclical commodity. One third of the world's population has inadequate supplies, according to the United Nations, and this proportion is likely to rise to two thirds by 2025. It is also expensive – before tax, a litre of bottled water costs more than two and a half times as much as a litre of petrol.

"Two thirds of the planet is covered with water. However, just 2.5 per cent of this is fresh water," says Dugan. "Of this, most is permanent ice or snow in Antarctica and Greenland. Readily available water – from lakes, rivers and reservoirs – accounts for less than 1 per cent of all freshwater supplies, meaning that the most readily employable source of fresh water is in the shortest supply."

Barclays is not alone. Sam Liddle, manager of MitonOptimal's Global portfolio, sold his exposure to mining funds in the summer and bought the Pictet Water fund instead. This fund hopes to capitalise on investment needs in water infrastructure worldwide and on investments in companies that build, operate and maintain this infrastructure. Its top holdings include Veolia Environnement, Danone, Nestlé, Suez and Severn Trent.

"Our view remains that we will see a global economic slowdown in 2007. So we think we're right to maintain exposure to those sectors that are under-owned, under-valued and less sensitive to economic slowdown and to have moved out of the cyclical sectors, particularly commodity-related sectors that have none of those characteristics," he says. "Water is the least worn-out commodity and has great long-term fundamentals not dependent on emerging markets such as China, unlike many of the base metals.""