An investor is considering her next investment. Kirill Smyslov/Getty Images
According to the market research company Scope, German investors have 20 investment funds to choose from that focus on the topic of water. The assets under management of these funds have increased by around 150 percent to 25.8 billion euros in the last five years. Over one year, two ETFs offer the best return, over five years an actively managed fund is ahead.
Water is the basis of all life: What is self-evident for most households in Germany is, however, far from a reality for many people around the world – easy access to fresh drinking water. One of the ways we draw attention to this every year is World Water Day, which this year takes place on March 22nd.
How investors can invest in water
If you look around the ETF and fund market, you will find some green investment opportunities. Most focus on environmental, social and good corporate governance (ESG). However, there are also some products that are limited to a specific area – such as water. Investors should note, however, that these funds specifically focus on companies that have to do with water in a broader sense. These are thematic funds that often involve greater risk than broad-based products.
25.8 billion euros in water funds and ETFs
According to the analysis house Scope 20 investment funds are currently available to German investors who want to invest in the topic of water. All funds rely on companies active in the water sector. The funds of the Scope peer group “Equity Water” have assets under management of 25.8 billion euros at the end of February 2024. For comparison: five years ago the assets of the water funds were still 10.4 billion euros. This means an increase of 15.4 billion euros or around 150 percent – which shows growing interest from investors.
This segment predominantly contains actively managed funds. This means that fund management controls the investments and makes buying and selling decisions. However, there are also five ETFs that focus on the topic of water and track a specific index.
These stocks are in water funds and ETFs
According to Scope, the funds invest globally and broadly in companies such as:
Xylem: A US company that produces water treatment systems and analytical devices.
Veolia water: A world-leading environmental service provider from France that offers a comprehensive
Offers a range of solutions for the ecological transition in the areas of water, waste and energy management.
American Water Works: An American water utility company.
The best water funds and ETFs
“Water equity funds have historically delivered solid returns. The performance outlook in this segment remains positive in the long term. In order to meet the increasing demand in the area of water supply, it will not be possible to do without the expertise of companies from the private sector in order to be able to provide the necessary capacities,” say the Scope analysts.
At the end of February 2024, the average three-year return of the 16 funds with sufficient history was 7.8 percent per year after deducting costs. The spectrum ranged from minus 3.1 percent per year for “Hornet Infrastructure – Water” to 11.7 percent per year for “KBI Water”. This means that the best product was an active fund.
When it comes to returns over one year, the two younger and passive funds, the Global X Clean Water ETF and the Amundi MSCI Water ESG Screened ETF, are ahead with 20.1 percent and 19.7 percent respectively.
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MSCI World less risky than water funds and ETFs – but only slightly
The risk taken by managers of active water funds is comparable to that of ETFs. On average, the volatility of the comparison group was 16.4 percent per year. The fluctuation ranges over three years ranged from 15.6 percent to 18.6 percent per year. For comparison: The MSCI World Index had a volatility of 13.4 percent over the same period and was therefore slightly less risky than the water funds.
Only the Hornet Infrastructure – Water Fund has lower volatility, at 3.2 percent per year. However, the lower volatility of this fund is accompanied by negative performance over a one-, three- and five-year period.
Disclaimer: Stocks and other investments generally involve risk. A total loss of the capital invested cannot be ruled out. The articles, data and forecasts published are not a solicitation to buy or sell securities or rights. They also do not replace professional advice.