Dallas hedge fund manager Kyle Bass has raised tens of millions for his latest venture — rural land, water rights and environmental credits — but not without sprouting a new wave of opposition.
Conservation Equity Management pulled in $71.2 million from 63 investors for its second fund, the Dallas Business Journal reported, citing a recent SEC filing. The company targets large undeveloped tracts across Texas for projects tied to conservation, habitat restoration and groundwater resources. It previously raised $114 million for its first fund in 2022.
Bass is the founder and CIO of Dallas-based Hayman Capital Management and was popularized by Michael Lewis’ book “The Big Short” for shorting subprime mortgages ahead of the 2008 financial crisis. He launched Conservation Equity with longtime conservationist Terry Anderson in 2021. The firm aims for returns in the “mid to high teens” driven by rising land values and revenue from selling environmental mitigation credits, according to Bloomberg.
The firm’s first announced deals included the 479-acre Bahia Grande Conservation Parcel in Cameron County and a 3,500-acre farm near Tyler. Its portfolio has since grown to at least six sites across Texas, West Virginia and Virginia.
In May, CEM announced that the U.S. Fish and Wildlife Service approved its conservation bank for the Eastern Black Rail, a marsh bird listed as threatened by the Department of the Interior. The project, located in Brazoria County, will allow developers to offset ecological impacts elsewhere by buying credits from restored habitat on CEM’s land.
But the firm’s East Texas groundwater venture is proving more contentious. CEM has filed applications with the Neches & Trinity Valleys Groundwater Conservation District to drill into the Carrizo and Wilcox aquifers in Anderson County, proposing a phased water supply project pitched as a solution to Texas’ long-term drought risks.
The Carrizo–Wilcox aquifer system spans over 60 counties and serves major metros and smaller communities alike. Municipalities including Bryan–College Station, Tyler, Lufkin and Nacogdoches depend heavily on it for public supply. In Anderson County, cities like Palestine and Elkhart rely on the aquifer for wells that produce hundreds of gallons per minute.
At a June 19 public hearing in Jacksonville, however, residents and lawmakers warned of a slippery slope toward depletion, WFAA reported.
“Folks, it’s clear what is going on,” attorney Clayton Bailey said. “This is a grab for water, and it’s by a rich man who’s trying to enrich himself to the detriment of all of these good people here.”
Facing the backlash, the groundwater district delayed any decision by 90 days. That pause hasn’t slowed investor enthusiasm but it could complicate timelines for CEM’s next round of projects.
— Judah Duke
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