ETFs are the newest investment instrument to access the water industry because they are based on some newly-created water indexes. Here is a list of five ETFs that access all aspects of the global water industry.
PowerShares Water Resources Portfolio (NYSE: PHO)
Inception: September 2005
Underlying Index: Palisades Water Index
Investment Goal: Invests 90% of assets in common stocks and ADRs which comprise the index. The modified equal–weighted portfolio is re-balanced and re-constituted quarterly. The ETF is based on the Palisades Water Index, which is comprised of a group of 37 companies, five of them foreign, that trade in the U.S. market. (The foreign stocks trade as American Depositary Receipts.) The fund will normally invest at least 90% of its total assets in ADRs and common stocks that comprise the index. The index comprises the sector’s most widely held companies. At least 80% of them get at least 50% of their revenue from water. The modified equal weighted portfolio is rebalanced and reconstituted quarterly.
Top Holdings (as of September 2010): Tetra Tech (NASDAQ: TTEK), Valmont Industries (NYSE: VMI) , URS Corp. (NYSE: URS), AECOM Technology (NYSE: ACM), Veolia Environment (NYSE: VE), Itron (NASDAQ: ITRI), Lindsay Corp. (NYSE: LNN) Badger Meter (NYSE: BAMI), Danaher Corp. (NYSE: DHR).
PowerShares Global Water Portfolio ETF (NYSE: PIO)
Inception: June 2007
Underlying Index: Palisades Global Water Index
Investment Goal: Invests at least 90% of total assets in securities which comprise the Index and ADRs that comprise the index. Invests in companies engaged in the potable water business, technology and treatment of water and services related to global water consumption.
First Trust ISE Water Index Fund (NYSE: FIW)
Inception: May 2007
Underlying Index: ISE Water Index
Investment Goal: To seek investment results that correspond generally to the price and yield, before fees and expenses of the Index. The Index is modified and market capitalization-weighted comprised of exchange-listed companies that derive a substantial portion of their revenues from the potable and wastewater industry. The index begins by establishing the total population of stocks in the potable and wastewater industry and eliminates stocks which do not meet the Index’s baseline eligibility requirements. To meet index eligibility, a stock must satisfy market capitalization, liquidity and weighting concentration requirements. The index then selects the top 36 stocks in the industry by market capitalization. It is rebalanced on a semi-annual basis.
Top Holdings (as of November 2010): Lindsay Corp. (NYSE: LNN), Nalco Holdings (NYSE: NLC), Aqua America (NYSE: WTR), Companhia de Sanamento Basico do Estado de Sao Paulo-SABESP, American Water Works (NYSE: AWK).
SPDR FTSE Macquerie Global Infrastructure 100 (NYSE: GII)
Inception: January 2007
Underlying Index: Macquarie Global Infrastructure 100 Index
Investment Goal: Seeks to closely match the returns and characteristics of the total return performance of the Macquarie Global Infrastructure 100 Index, an equity index based upon the global infrastructure industry market. ETF is designed to provide portfolios with low portfolio turnover, accurate tracking and lower costs.
The Claymore S&P Global Water ETF (NYSE: CGW)
Inception: June 2007
Underlying Index: S&P Global Water Index
Investment Goal: Seeks investment results that correspond generally to the performance, before the Fund’s fees and expenses, of the index. The index tracks a portfolio of 50 global equity securities from developed markets of companies that are involved in water-related businesses. The index is comprised of a group of companies distributed equally among water utilities and infrastructure and water equipment and materials in all market capitalizations.
Top Holdings (as of November 2010): United Utilities PLC (OTC: UUGRY), Severn Trent PLC (OTC: SVTRY), Nalco Holding (NYSE: NLC), American Water Works (NYSE: AWK), Danaher Corp. (NYSE: DHR), ITT Corp. (NYSE: ITT), Kurita Water (OTC: KTWIY), Gerberit AG.