Investors looking to get a little more liquidity in their portfolio have a new choice; the addition of the Claymore S&P Global Water Index ETF
Water shortages in the western U.S. and other parts of the world could be a portent of water's future: limited supply and high demand. Anyone who has walked down the water aisle of the grocery store lately can attest to the value of this liquid.
Fund/country weights
CGW has its investments in 16 countries, with three of these making up over half of its assets. The U.S. accounts for 28% of the total, with France coming in at nearly 20%, and Japan counting for just over 16%. The fund's top three holdings make up a little over a quarter of the fund's assets and include Veolia Environnement
Index
CGW tracks the S&P Global Water Index, which is comprised of 50 companies. All of the index components are companies associated with the global demand for water, including water utilities, infrastructure, equipment, instruments, and materials. The stocks range in market capitalization from $250 million to $25 billion.
Water fundamentals
A space traveler gazing upon Earth might think there's an abundance of water on this planet. However, the supply of fresh water is only about 1%-2% of all water and doesn't change over time. Since there is only so much fresh water and there are billions of people competing for it, this commodity continues to grow in importance.
The water industry is one of the largest global industries, but unlike oil and gas, is far less cyclical. Although it is currently a fragmented and relatively undervalued commodity, some experts believe that water may follow in the path of oil. That could mean industry consolidation, wars fought over water, supplies locked up and constrained by cartels, along with shortages and high prices on the horizon.
Risks
CGW has a number of risks associated with investing in it, including a limited operating history. The fund is not broadly diversified, and the companies it invests in can be affected by environmental considerations, price and supply fluctuations, and water conservation efforts.
The global water industry is one where demand is likely to grow with population increases. Water has a history of strong and consistent growth and that is unlikely to change soon, in part because there is no substitute for water. Water is a unique commodity, and because of its similarities to oil, it might just be the next global commodity that pays off.
At Global Gains, The Motley Fool's new international investing service, these are the trends we think about all the time. We have a huge mandate: Find value wherever it exists in the world. We address it by hitting the road -- as my team will do when we depart for India, China, and Taiwan on June 2. We'll talk to people, meet with companies, and do what is so hard to do when it comes to investing overseas (and let's be honest, investing in general): Get beyond generalities to find where real opportunities lie. Get updates and analysis live from the field by sending an email to [email protected].
Fool contributor Zoe Van Schyndel lives in Miami and enjoys the sunshine and variety of the Magic City. She does not own any of the funds or securities mentioned in this article. The Motley Fool has a disclosure policy.
