Investment manager MFS has launched a fund dedicated to investing in water.

The MFS Aqua Fund will invest in publicly listed water utilities across the globe - a market that is said to be worth in the region of $460 billion.

MFS Aqua's managing director Richard Loury said that water scarcity had driven up prices at a rate three times that of inflation.

"When a resource becomes scarce there is a rise in both the value of the resource itself and in the value of the businesses associated with the development of that resource," Loury said. 

"What makes the water case even more compelling is that water is irreplaceable, there is no substitute for it.

"The Chinese government has already said that water scarcity is the number one issue facing economic growth in the country and has set aside US$125 billion to solving the problem."

MFS Aqua will be an Australian dollar denominated absolute return fund and is aimed at both institutional and retail investors. The minimum investment is $10,000.

One of the investments the fund plans to make is in the United States' largest publicly traded water utility Aqua America. Loury said it was just one of 52,000 water utilities in the US.

The fund aims to achieve double digit returns in a low risk, defensive sector, according to Loury. He added, however, there was risk attached to investing in listed entities.

"There will always be systemic risk to investing in public markets but as to risks related to investing in water, we are convinced our investment case is completely robust," he said.

"Water is not this year's story, it's not even this decade's story it's this century's story and beyond."

Richard Keary, the former head of BT Financial's alternatives team who was appointed by MFS this week, will help sell the fund to institutional investors.

He is chief investment officer at MFS Alternative Investments.