Quenching a thirst? Investing in water-related funds
As natural resources go, oil tends to get more attention from investors than clean drinking water, even against the backdrop of headlinegrabbing shortages in Flint, Michigan, South Africa and elsewhere.
But a few funds are showing that investing in utilities and water infrastructure and technology companies can pay off, especially for long-term investors looking to diversify their portfolio.
Several exchange-traded funds invest in water-related stocks, including PowerShares Water Resources ETF (PHO), First Trust ISE Water Index Fund (FIW) and Tortoise Water Fund (TBLU).
Each holds shares in U.S. water utilities, such as American Water Works, infrastructure companies like Aegion Corp. and technology companies like Xylem, a supplier of energy-saving pumps and controls for hot water systems.
The three ETFs are all up around 15 percent over the past 12 months. By comparison, the S&P 500 is up about 13 percent in the same period.
Demand for water grows
Their investment rationale centers on the growth in the need to update the infrastructure used to treat and transport clean water. The idea being that as demand for water grows along with the population, so will the need for new infrastructure and upkeep on water systems.
"What we try to do is focus on essential assets, and from our standpoint there's really not a much more essential asset than water," said Matt Weglarz, portfolio manager at Tortoise Index Solutions. "And people are really starting to realize we have a global water problem on our hands."
Weglarz notes that global water demand is expected to grow by more than 50 percent over the next 30 years.
The need for access to clean water has grabbed international headlines this year after a severe drought hit Cape Town and other parts of South Africa, prompting leaders there to warn that the city of 4 million would have to close most water taps sometime this year.
The so-called "Day Zero" when the taps are supposed to be shut off was supposed to happen last month. It has since been put off thanks partly to residents consuming water at restricted levels.
Closer to home, in Flint, Michigan, thousands of home water lines are still being replaced following revelations in 2015 that the city's water system was contaminated with lead due to a lack of treatment.
A 2015 assessment by the Environmental Protection Agency estimated that $472.6 billion was needed to upgrade the nation's public water infrastructure system.
That includes the cost to fix or upgrade thousands of miles of pipe, thousands of treatment plants and other key components of the nation's water system.
This 2016 photo shows the Flint Water Plant tower in Flint, Mich. As natural resources go, oil tends to get more attention from investors than clean drinking water, even against the backdrop of headlinegrabbing shortages in Flint, South Africa and...