Background
The Fund offers the opportunity to invest in Australian water entitlements, a key production input into many agricultural industries. Returns are expected to be generated through providing both leases of various time horizons negotiated on permanent entitlements (typically yielding ~4-6% over the course of the climatic cycle) and the active management of temporary allocations from an unleased portfolio, as well as capital appreciation. An investment in water also acts as a diversifier within an agricultural portfolio.
Duxton has been investing in water for over 10 years and has an extensive portfolio of water assets. Duxton’s specialist water asset team implements client’s direct water asset investment strategies, as well as providing strategic direction and action in support of its agricultural commodity projects. Duxton is uniquely placed in the industry, having built strong relationships with irrigators and brokers assisting with greater market trading opportunities.
Fundamental Driver of Value
Demand: Higher value permanent crops strategies have increased over the last decade, which have a substantially higher, inelastic water requirement compared to annual crops that increases as the crop reaches maturity. Permanent crops have an annual water requirement in both wet and dry years, and an annual water usage profile that increases from the time of planting to maturity.
Supply: Since 2009, the Australian Government has bought back approximately 30% of water entitlements from the consumptive pool. The initiative aims to support environmental water needs by reducing the consumptive pool of water available to irrigated agriculture.¹
1 Aither 2021, Australian Water Markets Report: 2020-21 Review and 2021-22 Outlook, Melbourne, Aither Pty Ltd
