As the West Dries Up, This Hedge-Fund Pioneer Stands to Make a Killing

[xchrom]

http://www.motherjones.com/environment/2014/01/summit-water-hedge-fund-mckenzie-funk-windfall-excerpt



***SNIP

WHERE WATER RUNS WHEN IT RUNS OUT

The offices of the world's first water-focused hedge fund overlook a parking lot in a subdivided landscape developers call the Golden Triangle. The neighborhood gets its water from the Alvarado Water Treatment Plant, run by San Diego's Public Utilities Department, which gets its water from the San Diego County Water Authority, which gets its water from the larger Los Angeles–dominated Metropolitan Water District, which gets much of its water—in greater proportions during California's droughts—from the 242-mile Colorado River Aqueduct, which gets its water from a reservoir straddling the Arizona border, Lake Havasu, which gets its water from the 1,400-mile Colorado River, which gets its dwindling water from thousands of streams, snowfields, lakes, and springs in a drainage basin covering nearly 250,000 square miles across seven western states. Without imported water, the 2.7-million-person San Diego metropolis, like much of Southern California, would be no more capable of supporting people than the coastal desert it once was. During my visit, at the height of a hot summer in 2010, I got my water one morning from a secretary, who handed me a tiny plastic bottle—Poland Spring, was it?—from the fridge.

The man I'd come to meet was John Dickerson, the founder and CEO of Summit Global Management, a former CIA analyst, and the buyer of billions of gallons of water in two vital, desiccating river systems: the Colorado and Australia's Murray-Darling. Both systems had recently experienced severe droughts that scientists tied to climate change. Financial managers like Dickerson, meanwhile, had experienced the opposite: a flood of money. Summit had launched its first water fund in 1999, but "for a long time," he told me, "I was a voice in the wilderness. We couldn't get anybody to buy our fund. Then came Al Gore and his stuff, the whole global-warming thing, droughts. Water became the go-to idea."

For the climate investor, water was the obvious thing. Carbon emissions are invisible. But melting ice, empty reservoirs, and torrential rainstorms are tangible—the face of climate change. Water made it real. After An Inconvenient Truth, during 2007's record melt in the Arctic, at least 15 water mutual funds launched globally; in two years, the amount of money under management ballooned tenfold to $13 billion. Credit Suisse, UBS, and Goldman Sachs hired water analysts, the latter calling water "the petroleum of the next century"—"At the risk of being alarmist," Goldman said in a 2008 report, "we see parallels with Malthusian economics."

Dickerson, in his late 60s, sat in a leather chair, and I sat across his desk from him. His bookshelf had three copies of An Inconvenient Truth and two of Cadillac Desert, Marc Reisner's seminal 1986 book on water and political power in the American West. "It's the most necessary of all commodities," Dickerson told me. "There's no substitute for it at any price. And we cannot make water. Did you ever think about that, really? Hydrogen and oxygen. You can't grow it."

[CRH]

1. Kick for exposure, Privatizing the crisis, n/t

[pscot]

2. Windfall

Sounds like interesting reading.