Q. What the heck are these?
A. It’s a legal term that describes how people whose land borders on water are allowed to use that water. For example, you usually have rights to swim, fish, boat, etc. But of course the big issue is consumptive rights, the right to pull water from the source and use it for drinking, agriculture, etc.

Q. Well, that’s interesting, but it’s a pretty arcane topic, no?
Yes, it’s an extraordinarily complex subject, but a relevant one for investors. Everybody’s looking for the right way to “play” water, and some hedge and private equity funds are actually running around and buying up land solely to acquire the riparian rights, which they can sell later. The idea is that the riparian rights will accelerate in value a lot faster than the land will, and sellers who are just thinking about the land costs may be good targets.

Q. Wow, OK, that’s a new one. But is it really so hard to invest in water? Can’t I just buy water somewhere in a commodities contract?
A. No, you can’t. There are a zillion water-related investment ideas, but no really pure play, as there is with, say, gold. There are, for example, mutual funds and ETF that invest in either water resource companies, water treatment companies, desalinization, utilities, infrastructure, etc. And I know some folks who buy, for example, a timber company not really for the timber, but for the water rights the company holds, sort of by accident. But no pure play.

Q. That’s actually kind of surprising. Why not?
A. There’s no free market in fresh water for a zillion reasons. As we mentioned a moment ago, the laws around water are wildly complicated…. for example, out west, the whole riparian rights thing is very much complicated by Native American treaties. And in most countries, water is considered a resource that cannot be freely owned and transferred. Lastly, it’s an awful difficult commodity to transport in bulk.

Q. But I’ve heard of lots of crazy schemes… for example, wasn’t there a plan to tow icebergs over to Saudi Arabia?
A. Yep. And we know of a melting glacier in Chile where the fresh water is for sale. But you still have to actually get it somewhere for delivery!