The Murray-Darling Basin Balanced Water Fund
The Nature Conservancy Australia established the Murray-Darling Basin Balanced Water Fund in 2015 to provide water security for Australian farming families while protecting culturally significant wetlands that support threatened species. The Murray-Darling Basin Balanced Water Fund is the first water investment fund in Australia to allow investors to achieve the multiple objectives of securing water for agriculture, realising a financial return and restoring threatened wetlands through a single investment.
The Fund invests through Water Entitlements which can be bought, sold or leased. They are a perpetual or ongoing entitlement to exclusive access to a share of water from a consumptive pool. The Fund generates financial returns through the annual lease of Water Entitlements, the trade of Water Allocations (specific volume of water allocated to a Water Entitlement) and through the long-term appreciation of the Fund’s portfolio of assets. The Fund then sells, or leases the majority of the annual temporary Water Allocations back to the agricultural community, while donating the remainder of the allocations to the environment each year. Environmental and social objectives are achieved by returning water to wetlands. The Fund is open-ended, with no fixed term.
Founded in 2004, Kilter Rural is a specialist asset manager, dedicated to investment in Australian real assets of farmland, water and ecosystem services. Kilter Rural is one of Australia’s largest and most experienced third-party managers of Water Entitlements. As at 30 June 2015, the Portfolio Manager had $110 million in water assets under management across the Southern Murray-Darling Basin.
Conservation, Environment & Agriculture
New South Wales and Victoria
Besen Family Foundation
Purves Environmental Fund
Miscellaneous organisations and High Net Worth Individuals
National Australia Bank
Southern Murray-Darling Basin. The Basin has a total market value of $10.74 billion as of September 2015. The investment strategy of the Fund targets Water Entitlements that provide the greatest utility of use/trade and exposure to potential clients seeking to access Water Allocations across the nine major Southern Murray-Darling Basin water catchment trading zones.
Water rights are assets that are gaining interest in the broader investor community and are known for long-term capital growth, low correlation to other assets and capacity to generate yield. Water Entitlements are 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. The rights of Water Entitlement owners are akin to the owners of land titles. The volume of water allocated each year to Holders of Water Entitlements can be either used or sold to other agricultural, urban or commercial water users.
The Nature Conservancy Australia charges a Water Portfolio Establishment Fee which is equivalent to 2.5% of the value of Units allocated, to cover costs associated with the development, design and establishment of the Fund, including the legal and financial analysis and modelling for structuring the water trading and environmental activities.
Kilter Rural, the Portfolio Manager, has a management fee as follows:
0.85% of assets under management if Fund size < $50 million
0.765% of assets under management if Fund size > $50 million up to $75 million
0.595% of assets under management if Fund size > $75 million up to $100 million
Liquidity in the Southern Murray-Darling Basin Water Entitlement market varies from year to year and by security or reliability class.
2.3% Net Operating Profit and Distributions (since inception, after fees)