Consider Adding Some Water to Your ETF Portfolio

Investors have realized the value in water investments, as companies that manage potable water for consumption or irrigation are becoming profitable. The scarcity of water has taken the resource to a commodity-level investment and ETFs are a way to get good portfolio exposure.

For investors interested in the water sector, there are many options as far as ETFs are concerned. Getting exposure to companies involved in the conservation and creation of potable water and to the companies that supply the machinery to make this possible are all ways to profit from water, explains Green Investing Now.

As conservation becomes key to creating sustainable businesses, the current business model may be transformed into a more sustainable production process.

Here are a few of the related ETFs to choose from:

• PowerShares Global Water Portfolio (PIO): expense ratio 0.75%; this ETF is international, with a 30.7% weighting in the United States. It seeks to replicate the performance of the Palisades Global Water Index.

• PowerShares Water Resources Portfolio (PHO): expense ratio 0.66%; this ETF focuses on the provision of potable water, the treatment of water and technology and services directly related to water consumption.

• Claymore S&P Global Water ETF (CGW): expense ratio 0.65%; the companies in this ETF are associated with demand of water, water utilities, infrastructure, equipment, instruments and materials. The index focuses on global developed markets.

• First Trust ISE Water Index Fund (FIW): expense ratio is 0.77%; the index includes the top 36 stocks in the industry and the portfolio is balanced twice a year.

Comments

[Mad Hedge F...:]

I'll take mine on the rocks. If you think that the upcoming energy shortage is going to be bad, it will pale in comparison to the next water crisis, so investment in fresh water infrastructure is going to be a recurring long term investment theme. (See my earlier efforts to get you into the water space at www.madhedgefundtrader...). One theory about the endless wars in the Middle East since 1918 is that they have really been over water rights. Although Earth is often referred to as the water planet, only 2.5% is fresh, and three quarters of that is locked up in ice at the North and South poles. In places like China, with a quarter of the world’s population, up to 90% of the fresh water is already polluted, some irretrievably so. Some 18% of the world population lacks access to potable water, and demand is expected to rise by 40% in the next 20 years. Aquifers in the US, which took nature millennia to create, are approaching exhaustion. While membrane osmosis technologies exist to convert sea water into fresh, they use ten times more energy than current treatment processes, a real problem if you don’t have any, and will easily double the end cost to consumers. While it may take 16 pounds of grain to produce a pound of beef, it takes a staggering 2,416 gallons of water to do the same. The UN says that $11 billion a year is needed for water infrastructure investment, and $15 billion of the US stimulus package will be similarly spent. It says a lot that when I went to the UC Berkeley School of Engineering to research this piece, most of the experts in the field had already been retained by major hedge funds! At the top of the shopping list to participate here should be the Claymore S&P Global Water Index ETF (CGW), which has appreciated by 32% since I first brought it up. You can also visit the PowerShares Water Resource Portfolio (PHO), the First Trust ISE Water Index Fund (FIW), or the individual stocks Veolia Environment (VE), Tetra-Tech (TTEK), and Pentair (PNR). Who has the world’s greatest per capita water resources? Siberia, which could become a major exporter to China in the decades to come.

Jul 02 02:57 PM

[JGL:]

A next article comparing the performance of these 4 ETFs would be great as well as a forward looking view on the four portfolios.
I also personally that watwer will ebcome a large political and social issue in the future. The question is is thisin 5, 10, 20 years and which industries beyond bottle water (!) will profit from it.
Thanks for bringing this topic. Please elaborate!

Jul 03 08:23 AM

[danno:]

These water funds are just slick fads preying upon investor ignorance or laziness to do thorough investigation - with no real intelligence behind them. There aren't enough good water companies to make an index or ETF.

1) Most of the good water technology companies are buried inside big conglomerates so the remaining public ones are pretty mediocre companies. Theyre mostly stuck with public monopoly mentality and management quality to boot.
2) Water utility prices are heavy regulated and thus they have a hard time earning theyre cost of capital.
3) Many of the companies in these indexes have only marginal exposure to water.
4) Many of these so called water companies actually focus on things like pumps for swimming pools.
5) Selling products to water utilities is a very tough business unless you have a really special product it's just a price game.

Jul 03 10:24 AM