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Asset Preservation Advisors




City:Atlanta

State: GA



BIOGRAPHY:
APA’s philosophy is to work closely with our clients to develop an in-depth understanding of their unique needs and objectives. We then customize a municipal bond portfolio that best meets their specific goals and needs. APA manages high quality municipal bond portfolios in four strategies: Short-Term, Intermediate-Term, High Income, and Taxable.

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Investing in the Drought

There are limited options in water-related mutual funds, but private companies involved in water retention and infrastructure improvements are popping up.

| BY Kent McDill

In the free market world of supply and demand, water is becoming a stronger investment as the cost of producing it, saving it and reusing it goes up.

But whereas investors long looked at municipal bonds as a way to put away some money for future gain, today the immediacy of the water supply issue in California and the southwestern United States has raised the urgency to find solutions and raised the possibility of making money as technicians try to find solutions to the drought situations.

In a story written by Joanne Cleaver for U.S. News and World Report, the municipal bond investment gets scuttled because municipalities may have trouble paying the bonds off if water supply dwindles.

Keeping in mind that municipal bonds are a long-term investment, investors do have concern that municipalities won’t get the necessary revenues to pay off the bonds if water use is restricted, people use less water just out of community spirit, or the water isn’t there to be used. But municipalities are usually required to have a one-year reserve of payments, and in that time can raise rates to make up the difference.

Water rates are also historically low, well below the actual cost of delivery. But water was long thought to be an endless and endlessly renewable resource. Incremental rate changes would not be considered painful to most consumers, and could make up the difference in revenue quickly.

But there are more immediate needs related to water that could spur investment interest.

First, there is a need to improve infrastructure to retain the water we currently have. Infrastructure projects can occur on a city, county or state level, and bond issues will take place to pay for those constructions.

There is also investment to be made in the companies that produce equipment used to build or replace infrastructure, as well as in companies developing new technologies to provide more water to drought-stricken populations.

Desalination plants are appearing along the coast of California, including the large one being retrofitted north of San Diego.

Then there is the recapture industry. Water, it turns out, is actually everywhere if only it can be extracted. An entire industry of inventions are being utilized to pull water out of the air we breathe, especially along the coasts, where such water is plentiful if it can be captured.

Maintaining the water we have is another investment possibility. Companies that provide smart metering and leak detection are burgeoning, and private companies are taking advantage of these technologies as states and other municipalities begin to issue fines to water over-users.

The investment possibilities that exist are only available through individual companies working on new technologies. Investment News notes that as of spring of 2015, there were only four exchange-traded funds and two mutual funds specifically dedicated to investing in water-related industries.

In April, strategist Mary Ann Bartels of Bank of America Corp.’s Merrill Lynch urged its advisors to look into alternative investments related to the consumption and preservation of water.

“It’s actually a scarce commodity,’’ Ms. Bartels said to Investment News. “It is an investable theme, but it’s not just about buying the underlying commodity – water – it’s about buying companies that clean the water, that build the infrastructure.”



About the Author


Kent McDill

kmcdill@spectrem.com

Kent McDill is a staff writer for Millionaire Corner. McDill spent 30 years as a sports writer, working for United Press International and the Daily Herald of Arlington Heights, Ill. From 1988-1999, he covered the Chicago Bulls for the Daily Herald, traveling with them every day through the nine-month season. He also covered the Bulls for UPI from 1985-88, and currently covers the team for www.nba.com. He has written two books on the Bulls, including the new title “100 Things Bulls Fans Should Know And Do Before They Die’, published by Triumph Books. In August 2013, his new book “100 Things Bears Fans Should Know And Do Before They Die” gets published.

In 2008, he resigned from the Herald and became a freelance writer. The Herald hired him to write business features and speeches for the Daily Herald Business Conferences and Awards presentations.

McDill also writes a monthly parenting column for the Herald’s Suburban Parent magazine.

McDill is the father of four children, and an active fan of soccer, Jimmy  Buffett and all things Disney.