Exchange traded funds (ETFs) that invest in water generally are performing well because water has become a commodity of limited supply and unlimited demand. In fact, water available for human consumption represents less than 1% of all water on the planet, while the renewable supply has fallen by almost 60%, reports Palash Ghosh for BusinessWeek. "Only 20% of the global population has access to running water and 40% has no access to clean water or sanitation," says one water expert. "Within 50 years, more than half of the entire earth’s population of more than 9 billion will be living with water shortages affecting 80 countries, including the U.S."
Experts expect spending on U.S. water infrastructure to accelerate because the Environmental Protection Agency (EPA) declared that at least 25% of the nation’s pipes are in poor condition and by 2020, that number is expected to increase to 45%. These massive improvement projects could be another major boost to water ETFs.
Another problem that water supplies face is in emerging-market countries like China. China has more than a fifth of the world’s population, but only 7% of its fresh water supply. In addition, China’s water is so polluted that less than 15% of the nation’s population has access to safe drinking water. Below are some of the water ETFs:
- PowerShares Water Resources Portfolio (PHO)
This ETF tracks the Palisades Water Index. Currently, it’s up 21.2% year-to-date. - First Trust ISE Water Index (FIW)
FIW tracks the ISE Water Index. Currently, it’s up 5.7% for the last three months, having launched in May. - PowerShares Global Water Portfolio (PIO)
PIO serves as an international variant of PHO. It invests in Britain, Japan and the U.S. It also tracks the Palisades Water Index. Currently, PIO is up 0.6% for the last three months, having launched in June. - Claymore S&P Global Water ETF (CGW)
This ETF tracks S&P Global Water Index, which is invested equally between two separate types of water-related businesses: water utilities and infrastructure, and water equipment and materials. Currently, CGW is up 1.3% for the last three months, having launched in May.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. 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.