The Islamic superannuation fund is investing in Australian water rights via Pinnacle’s Riparian Capital Partners.
The investments are held by Crescent Wealth’s socially and environmentally responsible investment options in funds managed by Riparian, which invests in perpetual water right entitlements and then sells or leases annual water allocations under these entitlements.
Crescent’s head of investments Mas Harris said water rights are a great fit for the fund’s principles and range of alternative investment options. They’re also a great option for members wanting to reduce the volatility in their portfolios, he added, because returns are uncorrelated to traditional asset classes. This is because the drivers of the returns differ from those of most other asset classes.
“In Australia, water rights are freely traded in an open market with the twin objectives of ensuring economically efficient water use and environmental sustainability. The market is well established and regulated which gives us assurance as investors that we are entering a market with good governance, stability, and transparency,” Harris said.
“Australia is one of the driest contents in the world in terms of water assets and we see this as a great potential investment over the longer term as the market develops and matures further.”
Since 2008, water rights have generated an average yield of above 4%, Riparian said.
Riparian Capital Partners managing partner Nick Waters said the major long-term drivers of water entitlement value are factors that influence irrigators’ capacity to pay for water.
“These include productivity gains farmers are able to achieve on their operations and through moves to higher value cropping systems which enable farms to produce more value per megalitre of water,” he said.
“We are also seeing some pretty clear long-term trends playing out around climate change with lower rainfall patterns and higher temperatures which are relatively supportive of water values going forward.”
The overwhelming majority of water rights traded in Australia are located in the Murray-Darling basin.
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