about the first water ETF, the
PowerShares Water Portfolio
a year and a half ago when it first listed. I bought the fund a couple of days later for myself and for clients, and still own it. But there's a new water ETF on the block, and it already looks mighty tempting for both its broader field and narrower focus.
The water theme is simple to grasp:
- Demand: Demand for water has grown at twice the rate of the population, according to the World Resources Institute.
- Supply: Only 3% of the world's water is drinkable.
- Spending: Many Third World countries that previously have had trouble accessing good drinking water are making huge strides in modernizing their water infrastructure.
With those large forces in play, I believe there's plenty of room for another investment product.
just brought public a new water ETF on Monday that mimics the S&P Global Water Index, which is vastly different from the Palisades Water Index that underlies PHO.
Claymore S&P Global Water Index ETF
has more of a global focus, with 72% of the fund invested in foreign stocks, as opposed to PHO's 15%. In fact, CGW invests in equities hailing from 14 different countries.
are CGW's two largest components, accounting for more than 9% each. That makes France the second-largest country by weighting in the fund at 19.58%. The U.S. is the largest country in the fund, accounting for 28%, but the U.S. does not dominate the fund as with PHO; the largest U.S. holding accounts for only 4% of the fund.
CGW seems more directly focused on the third investment theme I outlined above, of bringing potable water to places that don't have enough, or any. Both Suez and Veolia are unambiguously water companies. Not so for PHO. Its largest holding,
(VMI - Get Report)
has exposure to the water market only through its irrigation segment, which is just one of many business units in the company and provides equipment for watering crops -- not exactly a "drinking water" concept.