Catch a New Wave in Water ETFs

CGW also differs from PHO in its sector makeup. PHO is much heavier in industrials, which account for about 57% of its capital. Compare that to 40% for CGW, which itself is heaviest in utilities at 48%. PHO has only 22% in utilities.

The heavier tilt toward utilities means, among other things, that CGW will have a higher yield than PHO. A Claymore spokesman said the yield of the index is currently 1.94%. Because Claymore is capping its fee on the fund at 0.65% until Dec. 31, 2009, the ETF's yield should be 1.29% for now. Based on its last four dividend payments, PHO yields 0.88%.

Continuing the comparison of CGW and PHO, the respective Web sites provide like time periods for performance history data. The index underlying CGW has consistently outperformed the index underlying PHO for the one-year period (22.80% to 5.90%), for three years (29.51% annualized to 19.31%) and for five years (22.04% annualized to 15.82%). Just to compare, the S&P 500 has one-, three- and five-year numbers of 11.83%, 10.06% and 6.28%, respectively, as of March 30.

I believe CGW's superior back test can be attributed to domestic equities having lagged foreign issues over the time studied. If domestic equities were to outperform foreign ones, PHO would probably beat CGW. (And it's worth saying that with the fee being adjusted, I expect CGW to mimic its underlying index quite closely.)