Water is becoming an increasingly scarce resource on a rising global population and other factors. Several exchange traded funds are designed to profit from this long-term trend, but some critics say the funds are too gimmicky.
Still, the largest water ETF, PowerShares Water Resources Portfolio (NYSEArca: PHO), has soaked up more than $1 billion in assets, so the sector has allure for some investors. It is down 1% so far this year.
The tracking index “seeks to identify a group of companies that focus on the provision of potable water, the treatment of water, and the technology and services that are directly related to water consumption,” according to Invesco PowerShares.
Analysts at Citigroup Global Markets expect water to be traded as an asset in the not so distant future, with water-related securities traded on global exchanges, reports Daniel Wagner for BusinessWeek. If a potential investor wants to look into this market, the analysts suggest browsing through companies that have high-end tech, treat water generated when fossil fuels are extracted or desalinate sea water. It is expected that these three areas will push growth in the industry by 4% to 6% over the next year.
Industry observers note the U.S. has been lagging on its investment into water infrastructure — the U.S. will need to invest $335 billion by 2026 to maintain basic access to clean water, according to some estimates.
So far, investment in water treatment and distribution infrastructure has been lacking due to the artificially low prices. However, analysts believe this trend will reverse once water is treated like any other global commodity.