by Paul McBeth
The Global Water Fund, which will launch at the end of June, is Pathfinder's second outing after it launched its Commodity Plus Fund last year. The water fund is expected to invest in 64 companies across 17 countries, with its heaviest weighting in American firms.
The fund will use the Dow Jones Global Developed Markets Index (DJGDMI) as its benchmark, and will initially track three indexes with a focus on water infrastructure companies. Over the past six years, five water indexes have returned between 7.8% and 11.3% per annum compared to the DJGDMI's 4.8%.
Executive directors Paul Brownsey and John Berry say only 1% of the world's water is freshwater that can be used to service the population. Developing countries are continuing to grow at a rapid pace, and alongside a greater urbanisation, demands on water are growing, Berry said.
Brownsey and Berry are proud of the transparency of their fund, and they say their own significant investment in the fund aligns their interests with those of investors. The fund has a management fee of 1.3% per annum of the fund's net asset value, with no performance fee.
The fund will have a "stop-loss" mechanism where the managers will allocate half of the fund to cash to reduce extreme volatility in the indexes. This will be set each month. The managers will also set a monthly currency hedging strategy to minimise the volatility of the kiwi dollar.
Berry and Brownsey say investments in the fund should be part of a long-term strategy and that the water fund offers a balanced portfolio the opportunity to get exposure to a niche growth area. The fund will have monthly entry and exit options.
Pathfinder's commodity fund made a net return before tax of 6.8% in the seven months to the end of last year, and has posted minus 3.43% this year after a 9.09% slump in January. It made a 2.48% return in March.
This is the second dedicated water fund to be launched in New Zealand. The first was done by Liontamer in 1997 when it rolled out the KBC Water Fund. However that was closed down after management bought the company back from than majority shareholder KBC.
Paul is a staff writer for Good Returns based in Wellington.
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