Executive Summary
- Water is a long-term, stable growth industry
- Population growth, increasing per capita consumption and fixed supply are the basis of the investment case
- Ways to invest with ETFs:
Investment case
The San Diego-based investment firm Summit Global Management specializes in water investments and has summarized the investment case for water in The Complete Introduction to Water Investing.
Some of the highlights from the Summit report:
• Water is a commodity that has no substitute
• Intractable demand has made global hydrocommerce a stable, non-cyclical, low-risk investment
• Supply-Demand imbalances are created by global population growth, depleted groundwater supplies and rising per capita water consumption
• Aging and insufficent infrastructure – for example, the U.S. has 700,000 miles of drinking water pipe, some of which is 100 years old
• Privatization and consolidation of water systems to support the need for large capital expenditures
• Environmental regulation is raising standards and requiring more investment
Overview
There are 4 exchange traded funds that focus on water.
The largest of the group is the $2 billion PowerShares Water Resources Portfolio (PHO) which owns 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.
Top holdings as of July 28, 2008 include manufacturers Valmont Industries and Danaher Corp, instrument maker Agilent Technologies, chemical producersNalco Holding and Tetra Tech and French water plant operator Veolia Environnement.
PowerShares Global Water Portfolio (PIO) holds global companies that focus on the provision of potable water, the treatment of water and the technology and services that are directly related to global water consumption. The equal weighted fund is rebalanced quarterly.
The Claymore S&P Global Water ETF (CGW) owns approximately 50 companies associated with the global demand for water, including water utilities, infrastructure, equipment, instruments and materials.
The First Trust ISE Water Index Fund (FIW) owns the top 36 stocks in the potable and wastewater industry.
Top Performers
Largest
1. PowerShares Water Resources Portfolio (PHO) – $2,480 million
2. Global Water Portfolio (PIO) – $401 miillion
Lowest Cost
1. First Trust ISE Water Index Fund (FIW) – 0.60%
2. S&P Global Water (CGW) – 0.65%
See the directory.