Why Invest in Water?

LOW COST FUNDS: Water could prove the most profitable commodity investment as demand for fresh water has increased at more than twice the rate of global population growth

Kenneth Lamont 21 April, 2015 | 3:38PM
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Kenneth Lamont: The main investment thesis underlying an investment in global water equities revolves around the scarcity of fresh water as a commodity. Indeed, over recent years demand for fresh water has increased at more than twice the rate of global population growth, leading to dramatic predictions of future shortfalls between supply and demand. 

Additionally, fresh water resources are not evenly distributed across the globe, with even highly developed regions such as California, not immune to crippling shortages. This environment is likely to provide an increasing number of opportunities for companies involved in the treatment and distribution of water globally. 

One of the key attractions of ETFs is that they can provide transparent, low-cost equity sector exposure. Currently, the most popular ETF, in terms of assets under management, tracking the water equity segment, is the iShares Global Water ETF (IH20) – which physically replicates the S&P global water index – meaning that it physically holds all 50 stocks as per the index – and charges a management fee of 0.65%. 

Investors may also wish to look at the Lyxor World Water ETF (WATL), which charges a slightly lower management fee of 0.60% and offers a narrower exposure of 20 companies.


The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
iShares Global Water ETF USD Dist GBP5,344.00 GBX0.62Rating
Lyxor MSCI Water ESG Fltrd (DR) ETF Dist GBP5,595.44 GBX0.32Rating

About Author

Kenneth Lamont  is a passive funds research analyst for Morningstar Europe.

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