Water is not, at least not yet, a tradeable commodity on par with the likes of gold or oil, but the water investment thesis has been gaining momentum in recent years. Providers of exchange traded funds have obliged that momentum with several products that help investors tap various water-related investments.
The Guggenheim S&P Global Water Fund (NYSEArca: CGW) and PowerShares Global Water Portfolio (NYSEArca: PIO), which both track companies that are associated with global water utilities, infrastructure, equipment, instruments and materials, are up 18.1% and 15.7%, respectively, over the past year.
CGW “launched in May 2007, tracks 50 companies with water-related businesses. Roughly half of the group is in infrastructure and utilities, such as American Water Works (AWK). The other half falls into the category of materials and equipment, including top holding Geberit (GBRY), a Swiss manufacturer and supplier of sanitary parts and systems used in construction,” reports Sarah Max for Barron’s.
The Summit Water Infrastructure Multifactor Exchange Traded Fund (NYSEArca: WTRX) debuted in August as the first smart beta alternative to traditional water ETFs.
WTRX follows the Summit Zacks Global Water Index, which provides exposure to 30 to 50 companies engaged in the global water industry. Specifically, the underlying index will utilize a rules-based indexing methodology to incorporate fundamental factors that have been strong historical indicators of the long-term performance of water equities.
The First Trust ISE Water ETF (NYSEArca: FIW) and PowerShares Water Resources Portfolio (NYSEArca: PHO) both track U.S. companies that derive their revenue from products that conserve and purify water.
As the world reviews the effects of climate change, global population growth and inadequate or aging infrastructures, investors can consider water industry-related exchange traded funds to capture potential long-term opportunities.
The World Energy Council estimates that total power demand for water is expected to rise 100 billion cubic meters by 2050. For instance, Asia faces challenges to water supply for power generation to meet growing population and associated power requirements. China alone is projected to see water demand rise 15% in the next 40 years.
FIW “also has heavy exposure to utilities and industrials, though its largest holding, Agilent Technologies (A) is a health-care company focusing on life sciences, diagnostics, and chemical analysis. The ETF is up 47% over the past year, buoyed by top holdings such as Brazilian water and sewage company Companhia de Saneamento Basico do Estado de São Paulo (SBS), up 129%,” according to Barron’s.