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Invest with Purpose.  Leave a Legacy. 
Read more to learn about Investing in Vital Assets.

Our nation's freshwater infrastructure faces a critical juncture. Largely built on systems developed during the 19th and early 20th centuries, our water infrastructure is aging, our technology outdated and our governance systems ill equipped to handle rising demand and environmental challenges. Additional strain is being placed on these systems from a variety of sources, including pressures from urbanization and changing climate conditions, such as increases in both droughts and extreme one-day precipitation events.

This report seeks to tackle these issues and deliver some recommendations on how to understand and confront the pressing need for more sustainable and integrated water infrastructure financing models. This report is the product of a meeting convened by The Johnson Foundation at

Wingspread, in collaboration with American Rivers and Ceres, which brought together a group of experts to discuss ways to drive funding toward the infrastructure we need for the 21st century.

Specifically, this group focused on the following questions:

• What new financing techniques can communities use to pay for integrated and sustainable
• infrastructure approaches?
• How can we direct private capital toward more sustainable water management projects?

As fiduciaries we are constantly being bombarded with new investment theories, academic research, regulatory uncertainty and a near compulsive obsession with transparency and monthly mark to market valuation. "Fear and greed" have been replaced by "risk on vs. risk off", black swans have become regular domestic animals and fiduciary fatigue is changing the composition of investment committees all around the world. Allocators often find themselves "chasing the wind" rather than focusing their energies on a few aspects that will really make a difference to their client's results and peace of mind.

In this easy to read executive briefing we aim to identify key areas that are worthy of our attention as getting them right makes the difference between success and failure.

In the past three or four years there has been a strong focus on investor due diligence with regard to the structure of hedge funds and the managers of those hedge funds. This has meant that hedge fund managers have had to concentrate their minds on being prepared for more sophisticated due diligence by their investors.

The attached white paper produced by Merlin Securities and written by Patrick McCurdy, a Partner in Head of Capital Development at Merlin Securities, is designed to help managers prepare themselves for such sophisticated investor due diligence. We consider this white paper to be very thorough and complete and are happy to publish it here with full credit to Merlin Securities.

An eye opening presentation by the late Matthew R. Simmons, Chairman Emeritus, Simmons & Company International. Matthew Roy Simmons (April 7, 1943 – August 8, 2010) was founder and chairman emeritus of Simmons & Company International, and was a prominent figure in the field of peak oil. Simmons was motivated by the 1973 energy crisis to create an investment banking firm catering to oil companies. In his previous capacity, he served as energy adviser to U.S. President George W. Bush. He was, up until his death, a member of the National Petroleum Council and the Council on Foreign Relations. 

Simmons was the author of the book Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy, published in 2005. His examination of oil reserve decline rates helped raise awareness of the unreliability of Middle East oil reserve data. He gave numerous presentations on Peak Oil and water shortages.

Investors' interest in Liquid Commodity Trading Advisor (CTA)/Macro strategies accelerated sharply after the 2008 Global Financial Crisis, as these managers' outperformed long-only and hedge fund strategies and provided a ready source of liquidity to cash-strapped investors. This was broadly cited as the "2008 Effect".

There has been a decisive shift within the Liquid CTA/ Macro manager landscape toward systematic as opposed to discretionary trading. Whereas AUM was fairly evenly split between these two approaches in 2000 (55% systematic and 45% discretionary),that ratio changed dramatically to 83% systematic and 17% discretionary by the end of 2011.

This is an outstanding piece of research provided by the team at Citi's Prime Finance Business Advisory Services

The world is increasingly turning its attention to the issue of water scarcity. Investing in water is one of the major topics heard in investment committee meetings around the globe. Many countries face water scarcity as a fundamental challenge to their economic and social development; by 2030 over a third of the world population will be living in river basins that will have to cope with significant water stress, including many of the countries and regions that drive global economic growth.

Across the globe, policy makers, civil society and the business sector are increasingly becoming aware of the challenge facing global water resources, and the need to carefully manage these resources. Progress has been limited, however, and overall too slow. One missing piece has been the lack of a rigorous analytical framework to facilitate decision-making and investment into the sector, particularly on measures of efficiency and water productivity.

The report Charting Our Water Future was developed to take a first step in providing greater clarity on the scale, costs and tradeoffs of solutions to water scarcity. It is the result of a year-long collaboration involving IFC (a member of the World Bank Group), McKinsey & Company, The Coca-Cola Company, Barilla, New Holland Agriculture, Nestlé, SABMiller plc, Standard Chartered Bank and Syngenta AG, and has relied on the input of over 300 specialists and public sector practitioners as well as the consistent guidance of a group of expert advisors.

AIMA has released important new research co-commissioned with KPMG. It’s by the Centre for Hedge Fund Research at London’s Imperial College and it examines industry performance, volatility and risk.

It finds that for the period 1994-2011:

• Hedge funds have significantly outperformed traditional asset classes like equities, bonds and commodities
• Hedge funds were major generators of “alpha”
• Hedge funds achieved these returns with considerably lower volatility and Value-at-Risk (VaR) than either stocks or commodities
• In fact their volatility and Value-at-Risk were similar to bonds
• A very substantial majority of hedge fund profits went to investors (not as some allege, to managers)
• An investor portfolio equally balanced between HFs, bonds and equities would out-perform a traditional 60/40 allocation to stocks and with lower tail risk and higher Sharpe ratio

Worth Magazine's Karen Hube recently published a piece "10 ways to invest in water". For US Investors, accustomed to abundant and free water, getting used to the idea of water as a commercial commodity take stime. Don't let it take too long. Analysts expect water to evolve into a widely traded equity over the next decade.

Why ? The world's propulation is growing, but water resources aren't. Quite the opposite. Climate change is redirecting water to some regions and away from others. And some 1 billion people worldwide lack access to fresh drinking water while 2.6 billion lack adequate sanitation systems. Not to mention the fact that we are expected to add another 2 billion new people to this planet over the coming 30 years.

Scared yet ?  Here are 10 water related sectors that long term investors should be aware of.

Here's a link to the magazine: Its worth (excuse the pun) subscribing to:  http://worth.com/index.php

We covered the subject in our recent educational piece:  "Investing in Vital Assets"