Investment funds for privately owned water rising
Two of the world's largest water companies, Veolia Environnement and Suez Environnement Co., have offered dividend yields of 8.4 percent and 7.7 percent respectively.
Debt financing and complex deals
Kloeck's Signina Capital, which recently launched a $450 million fund, this year closed a deal involving the City of Ottawa in a contract that pays an annual eight percent.
"There are plenty of deals that we consider sweet spots," said the CEO of Kloech’s operations. His investments eye those in the $20 million to $100 million range.
Even bigger returns - and growth rates of up to 20 percent a year - could come from some emerging market sectors, such as Chinese water companies and those dealing with desalination, said Ian Simm of environment-focused Impax Asset Management. The Impax group hopes to double the 220 million ($357 million) of water assets it has under management within four years.
Not everyone is bullish. "There are few large stocks like utility companies and then a long tail of specialist smaller companies," said Richard Strathers, an equity analyst at Schroders. "The liquidity issue would also be a concern."
Politics is another worry for long term investments in a sector which carries risks of expropriation and where it can be hard to pass on price increases for such an essential service.
Many expect more growth in waste water as they see this market segment being less politically charged and offering higher margins.
Britain's water companies offer exactly the sort of stability and clear regulation that investors are seeking and the number of deals shows the growing appetite for the sector.
China Investment Corporation and the BT Pension Scheme both picked up stakes in Thames Water this year, while Canadian pension funds CDPQ and CPPIB have acquired stakes in South East Water and Anglian Water respectively. Morgan Stanley bought a 90 percent stake in French water firm Veolia's British business.
Another advantage of water is that its performance is not linked as closely to overall economic growth as other infrastructure investments, noted Tony Rocker, partner at consultancy KPMG's infrastructure unit.
"During the financial crisis of 2006-2009, it was the GDP linked infrastructure assets that didn't perform as well as expected," he said. Water did exactly what it positively projected to do.