Water
Published by Radif Partners · Updated
Water utilities, technology, treatment, essential resource investing
This page compares 2 funds in the Water category, with ongoing charges from 0.49% to 0.65% and a median of 0.57%. The gap between the cheapest and the dearest is worth roughly €160 over ten years on €10,000 invested: for a comparable index, that is the most reliable difference between two funds, because it rests on no assumption about markets. 1 of the 2 funds are accumulating and 2 replicate their index by holding its securities, the others using a swap. The largest fund in the list is IH2O, which matters less for returns than for the risk of closure: a fund that stays small usually ends up merged. Past performance is not used to rank this list: over the horizons published it says more about the index being tracked than about how the fund is run.
2
0.57%
-2.4%
0.49%
+-2.3%
A regulated infrastructure theme, not a bet on a resource
Investing in water does not mean buying water: funds in this category hold distribution and treatment utilities, makers of pumps, valves and filtration membranes, and civil engineering groups specialised in networks. The economics are those of a regulated service: tariffs are set or capped by a public authority, which produces highly predictable revenue, often indexed to inflation, and slow but steady growth without the cyclicality of a conventional industrial sector.
That steadiness has two counterparts. The first is regulatory risk: a regulator that caps tariffs to protect users cuts the operator's profitability directly, as several British and Spanish decisions have shown. The second is rate sensitivity, common to all heavily indebted infrastructure businesses with stable cash flows: they are valued like long bonds and therefore suffer when rates rise. In portfolio terms, a water fund is often filed as thematic although its behaviour looks more like utilities, a defensive sector already present in a world index.
What the funds in this category show
Where the money actually sits
The category holds 2 funds and 2.8B in combined assets, and those assets are not spread evenly. iShares Global Water UCITS ETF USD (Dist) (IH2O), run by iShares, holds 2.1B on its own, and the three largest, iShares Global Water UCITS ETF USD (Dist) (IH2O) and L&G Clean Water UCITS ETF (GLGG), account for 100.0 % of the total. At the other end, L&G Clean Water UCITS ETF (GLGG) manages only 653M. Size is no guarantee of quality, but it decides two very concrete things: the spread between buying and selling price you pay on every order, and the odds that the fund still exists in ten years.
The fee gap, in money
Ongoing charges run from 0.49 % for L&G Clean Water UCITS ETF (GLGG) to 0.65 % for iShares Global Water UCITS ETF USD (Dist) (IH2O), a gap of 0.16 points, against a category average of 0.57 %. On £10,000 held for ten years that gap is roughly 160 in extra charges, before counting the return that money would itself have earned. It is the one variable in the comparison known in advance: past performance does not repeat, fees repeat every year.
Two funds in one category do not hold the same basket
The 2 funds listed track 2 different indices, among them S&P Global Water and Solactive Clean Water. The largest tracks S&P Global Water. That spread is why two funds filed under the same theme can differ by several points over a year: they hold different securities, weight them differently and rebalance on different dates. Each fund page names its index, and that is where a serious comparison starts.
Replication and domicile
All 2 funds in the category replicate their index physically: they hold the securities. What remains to check is whether the fund lends those securities, which the key information document states, and how much: lending income lowers the real cost, counterparty risk adds to market risk.
2 of the 2 funds are domiciled in IE, the rest in IE. Domicile sets the withholding tax the fund itself suffers on the dividends it receives, a cost absent from the stated fee but present in the return, and it also sets your own tax treatment depending on where you live.
Accumulate or take the income
1 funds accumulate dividends, 1 pay them out. The largest accumulating share class is L&G Clean Water UCITS ETF (GLGG), the largest distributing one iShares Global Water UCITS ETF USD (Dist) (IH2O). The choice is not about yield, both versions of the same index return the same before tax, but about tax and discipline: the accumulating class reinvests with no cost and no decision, the distributing class pays income that is taxable in the year it arrives.
Age and critical size
The oldest fund in the category, iShares Global Water UCITS ETF USD (Dist) (IH2O), launched on 2007-03-16, giving 19 years of history, and the newest, L&G Clean Water UCITS ETF (GLGG), on 2019-07-02. A long record shows how the fund behaved in a fall, which no one-year number can. A fund launched two years ago has lived through a single market regime.
None of the 2 funds manages under 100 million, the smallest being L&G Clean Water UCITS ETF (GLGG). The category is therefore clear of closure risk for want of size, the risk that forces a sale on the issuer's timetable rather than the holder's.
Frequently asked questions
What are water ETFs?
Water ETFs invest in companies involved in water treatment, distribution, infrastructure, and technology. They provide exposure to the growing global demand for clean water solutions. Check the figure in the key information document of the exact share class your broker offers, since two classes of the same fund can differ on charges and on distribution policy.
Why is water considered a megatrend?
Global water demand is projected to exceed supply by 40% by 2030. Population growth, urbanization, and climate change drive increasing investment in water infrastructure worldwide. What matters more than the ranking is whether the underlying index suits your horizon and your tolerance for a fall of thirty per cent, which no score can decide for you.
What companies are in water ETFs?
Top holdings include Xylem, Veolia, American Water Works, Danaher, and Ecolab. These companies provide water purification, distribution, and analytics services. Past performance over these horizons says more about the index than about the fund, which is why the comparison here weighs cost, size and tracking quality instead.
How have water ETFs performed?
Water ETFs have delivered steady returns with moderate volatility, similar to utilities and industrials. They are considered a defensive thematic investment with long-term growth characteristics. Over a ten-year horizon the ongoing charge weighs more than any difference in past performance: 0.20% against 0.50% on €10,000 is about €300, compounded.