Kilter Rural’s water funds post double-digit returns in 2021-22

Australian asset manager Kilter Rural has reported strong returns for its two water investment vehicles in the financial year ending June 30, 2022, which the firm said “highlights the continuing strength of water as an investment asset class.”

The Kilter Water Fund, an open-end vehicle launched in 2014 that is now around A$30 million ($21 million; €20 million) in size, delivered a return of 22.28 percent, while the Murray-Darling Basin Balanced Water Fund, another open-end fund launched in 2015, achieved a return of 17.47 percent. The firm said that demand from high-value permanent horticulture plantings had helped to secure the return.

The Balanced Water Fund (BWF) was launched in partnership with environmental organization The Nature Conservancy and has raised around A$90 million to date.

Earlier in 2022, Kilter Rural and TNC formed another partnership with the Murray-Darling Wetlands Working Group that resulted in plans to donate more than 5GL of water in FY23 to support 21 high-value wetlands covering approximately 1,600 ha. This was billed as the largest private donation of environmental water in Australia’s history and built upon 3.8GL donated in FY22.

BWF was explicitly established as an impact investment fund for water, with environmental water donations built into its mandate. It has delivered returns of more than 13 percent since inception.

Speaking to Agri Investor, Kilter Rural CEO Cullen Gunn said BWF’s returns showed that it was possible for a water investment vehicle to secure positive environmental outcomes while achieving strong investment returns through supporting agriculture.

“Those two water donations are among the largest private donations of water in Australia’s history, and to be able to do that while still delivering solid returns is an outstanding result,” he said. “It’s producing tangible results and it’s a pleasure to be involved in that fund.”

Gunn said that the firm would likely raise an additional A$30 million to A$40 million of capital across the two funds in the current financial year, with the Kilter Water Fund now added to parent company Regal Partners Group’s Australian Securities Exchange-listed RF1 alternatives investment fund.

On the water market more broadly, Gunn added: “Entitlement prices have remained firm throughout this wet period, which I think is a sign of more sophistication in the market. This might be a function of people taking a longer view, as well as the change in demand that has seen more permanent horticulture with a very different water outlook to that of an annual grower.”

Kilter Rural now has more than A$300 million of funds under management. The firm reached a A$60 million final close on its closed-end Australian Farmlands Fund at the end of 2021.