Water is a bona fide investment theme, and one that’s gaining traction. The latest ETF to come to market this week, the Tortoise Water Fund (TBLU), was nothing short of another testament to the fact that the business of water is real, and is investable.
As in most physical commodities, the case for investing in water is a simple case of supply and demand imbalances—water supplies are limited, demand is rising. Industry trends and demographic changes are largely to blame for the growing demand for the limited supplies of fresh water.
Today, there are six ETFs offering exposure to water as a business, and thanks to newcomer TBLU, they now range in cost from 0.40% to 0.80%, showing that fee compression is also real, even in highly niche-y corners of the ETF universe.
- PowerShares Water Resources Portfolio (PHO), with $780 million in assets under management and a 0.61% expense ratio
- Guggenheim S&P Global Water Index ETF (CGW), with $480 million in AUM and a cost of 0.64%
- First Trust Water ETF (FIW), with $251 million in AUM and a cost of 0.57%
- PowerShares Global Water Portfolio (PIO), with $185 million in AUM and an expense ratio of 0.76%
- Summit Water Infrastructure Multifactor ETF (WTRX) with $4 million in assets and an expense ratio of 0.80%—the costliest; the fund launched last summer
- Tortoise Water Fund (TBLU) just launched Feb. 15 with an expense ratio of 0.40% —the cheapest
If you are new to the idea of owning water as part of your broad portfolio, perhaps a way to think about it is similar to precious metal stocks such as miners. Summit Water Capital Advisors describes it in a comprehensive white paper as “hydrocommerce.”
The company’s research into the business of water is compelling. Yes, Summit is behind one of the ETFs in the market today, as well as a hedge fund focused in the space since 1999, so it has skin in the game, but the data are worth a closer look.