Liontrust’s new Water and Agriculture Fund will focus on aquaculture, water quality testing and water infrastructure.
Fund manager Hugo Rogers said that the fund would benefit indirectly from the rising price of water globally, and that it would concentrate on mid-cap companies.
About half of the long-ended fund, which is awaiting approval from the regulator in Dublin, will be invested in the US. Another 35 to 40 percent will be in Europe, and the rest will be internationally spread in locations including Chile.
A tranche of the fund will be dedicated to capitalising on increased protein consumption, specifically fish. Rogers said that the fund would invest two of the world’s leading salmon-producing countries: Norway and Chile.
“We are pushing the biological limits with salmon,” said Rogers. In Norway, salmon farms must be limited in size because increasing the biomass of farmed fish can lead to growing sea-lice infestations and damage wild fish stocks.
“Now the cages each have cameras in them, usually to stop the supply of food to the salmon once they have eaten enough, and they are exploring the use of cleaning fish that eat sea-lice,” said Rogers. “Chile is still developing these kind of controls, and while it has a way to go in this, supply is also limited there.”
A significant portion of its investment in the US will take advantage of China’s need to clean up its land and waterways.
“We will invest in China mostly by investing in companies in America that sell parts to China for environmental testing,” Rogers told Agri Investor.
While the country bulges with 20 percent of the world’s population, it only has 7 percent of its water. Petrochemicals and pollutants have poisoned waterways to the extent that half of this water is simply “untouchable.”
China is in the grip of a long-term water shortage and has faced many food safety scares. Images of poisoned farm animals or freshwater fish floating on the surface of lakes and rivers have highlighted Chinese farmers’ need for cleaner water.
However, the fund will have no appetite for making testing equipment in the country.
“We don’t like the state-owned companies; we don’t like the opacity in regulation,” said Rogers. “We find it difficult to own Chinese-listed companies where revenues and profits are determined by regulators that we don’t have contact with.”
Rogers said that testing and measurement focused investments would include food quality testing and technological and scientific research, but through “developed market companies with clear reporting and clear return profiles”.
He added China to imported the latest water technology from countries like the US.
Apart from new technologies and salmon farms, the fund will also invest in traditional water infrastructure such as pumps and piping in the US and Europe.
“We are just waiting for approval,” said Rogers. “It could be tomorrow, but we really expect it early in the new year.”
Rogers will manage the fund alongside Kristof Bulkai and Patrick Cadell. Liontrust managed £4.6 billion ($6.9 billion; €6.4 billion) as of 6 November.