ETF Talk: Water, Water Everywhere
Water seems to be increasing in value by the day, and rising demand worldwide for clean water is a key reason why.
Right now, an estimated 4,500 children worldwide die each day from unsafe water and deficient sanitary facilities. With heightened demand from a growing world population for clean water to drink, to cook, to irrigate crops, and to bathe, water is starting to become a much-appreciated natural resource.
I have been tracking this trend closely since last year. My team and I wrote a special report last August that highlighted the shortage of clean water in China as an investment opportunity. Our research found that 70% of China’s waterways and 90% of its underground water were dangerously polluted. But the lack of uncontaminated water doesn’t just affect the Chinese.
Exchange-traded funds (ETFs) aimed at water investment opportunities have sprung up and may prove profitable for you and your investment portfolio in the future. Two examples of these "water ETFs" come from the PowerShares ETF fund family: PowerShares Water Resources Portfolio (PHO) and PowerShares Global Water Portfolio (PIO). Two other notable water ETFs are Claymore S&P Global Water Index Fund (CGW) and First Trust ISE Water Index Fund (FIW).
To get you familiar with these water-based funds, here’s a brief summary of each.
PowerShares Water Resources Portfolio (PHO) began tracking the performance of the Palisades Water Index in 2005. The fund invests at least 80% of total assets in American Depositary Receipts and common stocks of companies in the water industry. Since its inception, the Palisades Water Index has a return of nearly 25%. Its average daily volume for the past three months is just above 640,000 shares.
PowerShares Global Water Portfolio (PIO), the second PowerShares water ETF, is based on the Palisades Global Water Index. Since the fund’s inception on June 13, 2007, the fund is down about 12%. It is averaging volume of just below 167,000 shares a day during the past three months.
The Claymore S&P Global Water Index Fund (CGW) and the First Trust ISE Water Index Fund (FIW) round-out our group of water ETFs. CGW tracks the S&P Global Water Index, while the First Trust ISE Water Index Fund (FIW) seeks to replicate the performance of the ISE Water Index. For the past three months, the daily trading volume is slightly above 124,000 for CGW and not quite 11,800 for FIW.
Now, I am not recommending any of these water related ETFs at this time, but what I do want you to be aware of is the broader trend driving the demand for clean water. Once that demand begins translating into companies that facilitate the flow of clean water, the spigot may indeed get turned on in one or more of these water ETFs.
Jim Woods is a 30-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor.
His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. Read more about Jim Woods.
