Quench­ing a thirst? In­vest­ing in wa­ter-re­lated funds

The Oklahoman (Sunday) - - BUSINESS - BY ALEX VEIGA AP Busi­ness Writer

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.

[AP FILE PHOTO]

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...

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