Water ETFs Everywhere

Interestingly, asset size seems to be a function of age rather than performance or other criteria. With the exception of Guggenheim S&P Global Water (CGW), which has more assets than the three-day older First Trust Water (FIW), longer time on the market has equated to more assets. While all four of the ETFs that have been around since 2007 are healthy in terms of assets, with $185 million or more, none of them has cracked the $1 billion barrier.

Expense ratios range from a low of 0.40% to 0.80%, but the differences should not be deciding factor with these funds. A global versus U.S. focus might be an important data point for someone looking to buy a water ETF, but for most investors looking to buy, the decision likely comes down to performance.

Fortunately, there is more than 9.5 years of performance for the four entrenched products, and reviewing that history produces a clear winner. The performance of the First Trust Water ETF (FIW) crushes the competition across nearly every time interval. Since June 14, 2007, FIW has returned 8.0% annualized versus 4.2% for CGW, 3.0% for PHO, and -0.1% for PIO. Additionally, FIW has accomplished this task with lower volatility than two of the other three. Over the past year, it has beat its competitors by 9.4% to 24.6%.

I do not own a water ETF today, but if I were inclined to do so, my choice would be the First Trust Water ETF (FIW). Its performance advantage is nothing new. It has led the group in performance consistently since 2007, which makes one wonder why it is only the third largest among the four water ETFs with long-term history. It has even outperformed the S&P 500 Index in dramatic fashion.

No matter how great the need for investments in the world’s safe water supply, there is clearly not a large demand for water ETFs at this time. Not enough to support six of them in my opinion, and some will probably fall by the wayside eventually. If shareholders start looking at their performance versus the competition, then “eventually” may come sooner. The two newcomers certainly have a tough road ahead to avoid becoming just another ETF fatality statistic.

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