The western United States has witnessed a rapid increase in urban population growth in recent years. This exponential rise has placed significant pressure on the available water resources. As cities expand, the demand for residential, commercial, and industrial water has skyrocketed, exacerbating the strain on already limited supplies.
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​The looming threat of climate change poses an additional layer of complexity to the water crisis in the western United States. As temperatures rise and weather patterns become more unpredictable, the availability of water resources may become even more tenuous.
Building a Dynamic
Water Rights Portfolio:
An Arbitrage Opportunity to Reduce Risk
Our Mission
The WATERVAULT Foundation, LLC, takes an innovative approach to building a strategic portfolio of water rights across the Western United States. We capitalize on the growing demand for water driven by population and economic expansion in the region, where future needs are projected to outstrip current supplies.
Our core strategy is to unlock the value of underutilized agricultural water rights. We see an opportunity in the price disparity between water used for agriculture and water used in cities. By identifying, acquiring, and responsibly developing these underutilized rights, we can transfer them to meet the needs of growing urban populations.
To finance the acquisitions, we plan to issue real world asset backed tokens. The tokens will be tradable on a public exchange, meeting the highest institutional quality standards. Each token represents a tangible asset: a share of our valuable water rights portfolio.
A proprietary index tracks portfolio value after acquisition. This index incorporates factors influencing water rights value, including the potential price increase associated with transitioning from agricultural to municipal use and escalating demand for moderately priced housing.
Water Transfers
All western states recognize water as a property right and allow for transfers of water. Transfers occur among those who use the water for the same purpose (agriculture to agriculture) or for different purposes (agriculture to urban or environmental). The highest prices paid for both leases and sales are paid by urban buyers.
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Agricultural water use accounts for as much as 80 percent of annual consumption in the western United States, but rising urban and environmental demand for water has created growing pressure to re-allocate water from traditional agricultural uses.
“These disparities in the value of water have occasioned calls for re-allocation of water from lower-value to higher-value activities through water marketing. Such trades can benefit both parties: farmers receive more for their water than they could earn in agriculture; and cities secure additional water at a lower cost than available alternatives, such as desalination. The need to develop water markets for the smooth, incremental transfer of water across sectors with minimum transaction costs has increased over the past 20 years due to brisk population growth, urbanization, increased environmental concerns, and a rise in the economic contribution of services simultaneous with a relative decline in agriculture.”
- Water Markets in the West: Prices, Trading, and Contractual Forms
Jedidiah Brewer Robert Glennon Alan Ker Gary D. Libecap
WaterVault America Foundation, Inc: Shaping the future of water rights through tokenization
The WaterVault Token is sponsored and issued by a Foundation.
Proceeds from the issuance of any WaterVault Tokens will be used to acquire water assets, creating a portfolio that proportionally back the tokens. This strategic initiative leverages the anticipated long-term surge in water demand.
Token Ownership: Individuals acquire WaterVault Tokens that represent equity ownership in the water rights held by the Foundation. These tokens provide voting rights and influence over key decisions.
Portfolio Strategy: The core investment strategy leverages the agricultural and municipal water rights price discrepancy, which is fueled by current drought conditions and outdated regulations governing agricultural water pricing. The portfolio will utilize available transaction data to create a water rights price index to analyze the historic sales data of water rights.
Foundation Governance: A core set of smart contracts defines the Foundation's rules and processes. Token holders can propose and vote on actions through these contracts, ensuring transparency, and community involvement.
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What are WaterVault Tokens?
WaterVault Tokens are tokenized real world assets secured by water rights.
WaterVault is a blockchain-based protocol that allows anyone to buy, sell, and trade fractional ownership interests in a water rights portfolio.
Each token represents a direct ownership in a portfolio of increasingly scarce water rights in the Western United States.
WaterVault Tokens: Unlocking Investment Opportunities for a Wide Range of Stakeholders
Investors are increasingly interested in water rights markets.
However, pureplay water rights investing has not been easily accessible up to this point.
The WaterVault portfolio will provide opportunity for direct investment in the sector to municipal users, family offices, high net worth individuals or institutions.
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WaterVault Tokens will reduce the barriers of accessibility, asset illiquidity and information transparency in the natural resource asset class.
The Portfolio Benefits of the WaterVault Token
Water rights are an asset with fundamental economic value that may offer the ability to offset risk in traditional asset classes such as equities, debt, and real estate.
Institutional investors, hedge funds, municipalities and individual investors seeking portfolio diversification and returns will potentially benefit from WaterVault Tokens.
Diversification Benefits
Low Correlation: Natural resources often exhibit low correlation with traditional asset classes like stocks and bonds. This means they tend to move independently, offering a hedge against market downturns in other sectors.
Inflation Hedge
Tangible Assets: Unlike stocks and bonds, natural resources are tangible assets with intrinsic value. Their prices often rise alongside inflation, protecting your purchasing power from erosion. This makes them particularly attractive during periods of rising inflation and commodity shortages.
Supply vs Demand
Urban Expansion in the West: The rapid expansion of cities in the western United States has led to increasing water needs in these areas. As urban populations continue to grow, the demand for water resources escalates, often resulting in higher prices due to supply vs demand.
Long-Term Demand
Essential Inputs: Essential resources like food, water, and energy have enduring demand, regardless of economic cycles. Investing in natural resource production, allocation or distribution can offer stable and reliable returns over the long term.
Index Measuring Water Rights Transactions
For effective portfolio valuation, many assets require periodic pricing verification. WaterVault aims to address this need by developing an index utilizing available data sources. This index will enable pricing of the portfolio using a basket of comparable water rights transactions.
Implemented as a weighted index, the WaterVault method takes into consideration various factors including population density, anticipated regional growth, transaction volume in acre-feet, and monetary value.
While the index will not directly price individual assets within a portfolio, it will significantly contribute to portfolio valuation. It will serve as a benchmark, provide data points for valuation models, and offer valuable market insights to inform investment decisions, thus ensuring accurate portfolio valuation.
Aquifer Diagram
- By T.C. Winter, J.W. Harvey, O.L. Franke, and W.M. Alley - Ground Water And Surface Water A Single Resource. U.S. Geological Survey Circular 1139, Figure 3.
Water supply in most geographies consists of both surface water and groundwater sources. The availability of these supplies depends on complex interactions among geography, weather, laws, and regulations—all of which influence how much water is available for beneficial uses.
The WaterVault Portfolio is expected to consist of a balance between the two water sources.
Learn More
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WaterVault Deck
WaterVault Tear Sheet
WaterVault Index Summary
Water Index Formula