All Wet: A Mixed Decision for Water ETFs

With California’s epic drought grabbing headlines across the country, it might be logical to assume that water exchange traded funds delivering banner performances in 2015.

In reality, the year-to-date performances by the four water ETFs widely diverge, indicating California’s drought has lifted some of these funds while being a non-starter for others.

The First Trust ISE Water ETF (NYSEArca: FIW) and the PowerShares Water Resources Portfolio (NYSEArca: PHO) both track U.S. companies that derive their revenue from products that conserve and purify water. What FIW and PHO do has not prevented the ETFs from falling 5.1% and 1.7%, respectively, year-to-date. [Looking at Water ETFs]

“Water-equipment suppliers, accounting for the bulk of the PowerShares and First Trust ETFs, have slumped as well. Shares of Energy Recovery (NasdaqGM: ERII) and Layne Christensen (NasdaqGM: LAYN), included in both ETFs, dropped more than 30 percent this year as lower oil prices hurt demand from energy companies,” reports David Wilson for Bloomberg.

Those stocks combine for 3.3% of the $195 million FIW’s weight and 1.4% of the $863.6 million PHO.

California’s drought struggles have prompted Gov. Jerry Brown to order a 25% reduction in water use. At a news conference earlier this week, Brown called for fines of up to $10,000 for wanton water wasters.