Swiss Bank Pictet’s Water Fund Boosted by Mideast Shortage

Swiss bank Pictet & Cie.’s water fund is profiting from the Middle East’s need to buy the technology to make more seawater drinkable as companies such as Xylem Inc. and Danaher Corp. step up business in the region.

“The companies that we are invested in are doing more business in the Middle East,” Hans-Peter Portner, manager of the Pictet Asset Management SA’s fund, said in an interview in Abu Dhabi. “They’re selling pumps, they’re selling membranes. The region is definitely a growth market for water companies.”

Arid Middle Eastern states including the United Arab Emirates, of which Abu Dhabi is the capital, rely on treatment plants to remove salt from seawater to make it drinkable. The region is estimated to need $900 billion in water infrastructure investment through 2030, Portner said April 22. Saudi Arabia spent $1.1 billion in 2012 on 128 water and sanitation contracts in Riyadh, whose population reached about 5.2 million last year.

Pictet, the first asset management company to start such a fund in 2000, invests in publicly traded companies in the $500 billion water industry. U.S. water technology companies Danaher, Xylem and Roper are among the 10 biggest holdings in the 2.3 billion-euro fund, accounting for 6.7 percent of the total. It’s gained about 10 percent this year, according to Bloomberg data.

Hurricane Sandy

Xylem, the ITT Corp. spinoff whose pumps helped clear New York tunnels of floodwaters after Hurricane Sandy, said in January that it was planning to expand its business in the region by opening an office in Saudi Arabia. Danaher, which makes microscopes in addition to water-treatment systems, opened a regional headquarters in Dubai in 2011.

Saudi Arabia has a “very, very harsh environment” with high evaporation, high population growth and high water demands, Mohammed Al-Saud, deputy minister of water affairs for Saudi Arabia’s Ministry of Water and Electricity, said April 23 at the Global Water Intelligence conference in Seville, Spain.

The government plans to expand wastewater and water infrastructure across the kingdom and improve the reuse of treated wastewater for agriculture, including more greenhouse farming, and developing rooftop agricultural plots, he said.

Masdar, the renewable energy company run by Abu Dhabi’s government, said in January that it will begin a project to desalinate water using power from renewable sources with the aim of building a full-scale plant by 2020. The U.A.E. opened a 10 billion dirham ($2.7 billion) power and water plant, the nation’s largest, and eight desalination units on April 8.

Saudi Plans

Saudi Arabia’s Minister of Water and Electricity said in January that the government had allocated $6.4 billion for water and sanitation projects in 2013. The country is the world’s largest exporter of oil.

“Water is essential for the oil and gas industry,” Alistair Wyness, group water expert at BP Plc in London, said at the GWI meeting of industry executives in Spain. “It we don’t have access to water, we can’t get the oil out of the ground.”

Still, shortages are forecast to spread to countries like Algeria and Morocco by 2025 as the region still isn’t investing enough in water infrastructure, capturing, treatment and recycling, Portner said.

“You have a lot irrigation needs in the Middle East and for that you don’t need drinking water, it’s a waste,” he said. “If you want to play golf in the desert, you need to irrigate. You don’t need to use drinking water.”

Geneva-based Pictet is Switzerland’s largest closely-held private bank.