Climate Change, Rising Populations Put Water ETFs in Focus
October 18th 2012 at 9:12am by Tom Lydon
Water continues to be an interesting investment theme as investors search for pockets of the stock market that will give their portfolios growth. This natural resource has become a commodity and focused exchange traded funds remain a safe way to gain desired exposure.
“While investors think about shelter and food, many overlook the other necessity all humans have: water. And in this age of climate change and complicated water rights between municipalities in Texas, California and elsewhere … well, water is a hot commodity even if it’s one of the most abundant resources on the planet,” Jeff Reeves wrote for InvestorPlace. [The Case for Water ETFs]
ETFs that have “water” in the title can be tricky. Most funds are not a pure water play, rather they contain companies related to creating filtration, potable water and companies involved in conservation.
The PowerShares Water Resources Portfolio (NYSEArca: PHO) has about $805 million in assets and costs 0.62%. The fund tracks the NASDAQ OMX US Water Index and focuses in on companies involved with water purification, and products focused on conservation both in the home and commercial.
PowerShares Global Water Portfolio ETF (NYSEArca: PIO) focuses in on emerging economies increases demand and use of potable water. The companies represented deal with stocks that are involved with the treatment of water and services related to global water consumption. [Rising Tide: Water ETFs]
Another reason investors are interested in water is the fact that Americans are paying 75% more for the resource then they were in 2012, reports Mac Slavo for ETF Daily News. A recent study by USA Today found that at about 100 large cities in the US, the prices hikes are so significant they are having to cut other expenses to afford it.
Furthermore, water rates are predicted to go up 5%to 15% per year for various reasons. Aging water system repair, more expensive costs to create potable water, and rising health care and pension costs for water department employees are just a few of the reasons water will cost more in the near future. [ Chart of the Day: Water ETFs]
PowerShares Water Resources Portfolio
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.