Head-To-Head: Water ETFs Pump Out Big Gains

by on April 10, 2013 | ETFs Mentioned:

Interest in commodity-focused ETFs has surged in recent years, as investors look towards this asset class for lucrative opportunities and diversification benefits. While most turn towards gold and oil for their go-to picks for commodity exposure, there is one particular resource that continues to fly under the radar for most: water. This everyday resource is often overlooked, although it makes up roughly three quarters of the Earth’s surface. Despite the overwhelming supplies of water, only slightly less than 3% is suitable for human consumption, making companies that conserve and purify water highly attractive [see How To Buy The Best Water ETF]. 

From a fundamental perspective, investing in water has a relatively sound thesis as everything from our bodies to our factories require water to operate; another appealing factor is that this commodity has no real substitutes. And thanks to the evolution of the ETF industry, investors can now choose from four products that offer exposure exclusively to water equities.

Water ETFs Pump Out Impressive GainsWater ETFs

The chart below highlights four water ETFs, comparing their performances across various time frames, including year-to-date, one, three and five-year returns [see also How To But The Right ETF Every Time]:

  • Water Resource Portfolio (PHO, A-)
  • S&P Global Water Index ETF (CGW, A+)
  • Global Water Portfolio (PIO, B+)
  • ISE Water Index Fund (FIW, A)

Across the board, Water ETFs have fared quite well over the years, generating attractive double-digit returns. Over the trailing one, three and five-year periods, First Trust’s FIW has come out on top, though the fund is the smallest of the list in terms of total assets under management. While there is no universally right choice from the above ETFs, investors should also consider other obvious factors besides performance, including expenses, liquidity and portfolio composition.

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Disclosure: No positions at time of writing.