MFS dives in

MFS is hoping to raise $200 million in inflows by June 2009 for its new water fund.

The fund manager has raised $20 million from existing MFS investors, but the fund’s investment manager Craig McIntosh said the second stage was to encourage financial planners to recommend the product to clients.

The fund will use six international managers that specialise in global water listed equities.

Four of the managers are from the US — Summit, Terrapin, Reservoir and Perella W — while two are from Switzerland — SAM and Signina.

The management style of the managers range from long-bias investing in only US water equities to more conservative investing in new technology companies based in Asia.

McIntosh said the new fund was actively managed, with its global managers seeking investment opportunities for the portfolio.

“We see the fund as a multi-manager product, with the six managers investing in different water companies,” he said.

“In the future, the fund may invest in Australian companies that are involved with water, but that is not on the horizon at present.”

However, Signina has been visiting Australia on a fact-finding mission to look for possible investment in local water related companies.

Signina Capital chief investment officer Martin Kloeck said the manager investment style was to pick young mid-cap companies with innovative ideas.

“While a lot of fund managers look at the technology companies are developing, we look for simple ways of dealing with water,” he said.

“This can be simple ideas such as better ways of drip watering, and we would invest in a company that had found an innovative way to do this.”

Kloeck said the innovative water companies were based in Asia with Singapore as a hub. The technology-based solutions are developed in the US.

“The reason why we are visiting Australia is to look for companies that are finding solutions for dealing with better water use, so it is a fact-finding visit.”

Kloeck said there were about 130 stocks worldwide that generate 60 per cent of their revenues from water.

Of this number, 70 per cent were in the mid-cap range. However, there are about 7,000 privately held water companies globally and Kloeck said some would eventually list, expanding the investment base.

McIntosh said returns for the MFS Water Fund were expected to be between 12 to 15 per cent a year after fees.

Fees for the fund include a 3 per cent contribution fee that is fully rebateable if invested through an adviser, a management expense ratio of 1.25 per cent and a 10 per cent performance fee if the fund outperforms the MSCI World index. There is also a 0.5 per cent trail for advisers.

The minimum investment for the fund is $10,000.