Update: iShares Global Water UCITS ETF

Statt mit dem Schlagwort "Wasser" kann diesen Themenfonds besser greifen, wenn man ihn als Barometer für Versorger-Aktien und maschinenbau-orientierte Industrieunternehmen versteht. Regional und mit Blick auf Einzeltitel ist der Index relativ gut diversifiziert.

Kenneth Lamont 20.02.2015

Rolle im Portfolio

The iShares S&P Global Water UCITS ETF provides equity exposure to the 50 largest companies globally involved in the water-related businesses.

The reference index is divided between regulated water utility companies and diverse industrial firms that have significant revenues generated from businesses related to water (e.g Pentair, a major manufacturer of water pumps and filters). The index's weighting scheme places a greater emphasis on firms whose primary focus is water-related business rather than the magnitude of water-related revenues. Therefore, many of the water industry's largest players--such as General Electric GE and Siemens SI--are not considered for inclusion in the index because their other business activities eclipse the relative importance of their water-related revenues. On account of these exclusions it can be argued that investing in this fund provides incomplete exposure to the overall water industry.

This ETF, given its narrow sector focus would be best deployed as a tactical tool in an already well diversified portfolio for those who hold a long-term investment thesis grounded in the need for upgrading and expanding global water infrastructure.

The S&P Global Water Index has exhibited a ten-year correlation to the MSCI World (~91%) and the STOXX Europe 600 (~83%), implying negligible diversification benefits when added to core equity holdings.

Historically, the utilities sector has produced strong, stable cash flows, which have translated into higher dividends. However, as of this writing, this ETF had a dividend yield of 1.7%, roughly equivalent to that for the MSCI World index.

Fundamentale Analyse

Despite being one of the most abundant commodities on earth, unequal geographic distribution and booming population growth mean that the long-term investment prospects surrounding the treatment and distribution of water remain compelling.

As a fundamental requirement for human life, it is perhaps unsurprising that population growth contributes to the demand for clean, fresh water. In order to support higher populations, water is needed in greater quantities for agricultural irrigation and livestock hydration as well as for human consumption. In recent years, global water consumption has been growing at twice the rate of population growth.

The United Nations projects the global population to grow 30% by 2030, by which stage the World is forecast to face a 40% global shortfall between supply and demand. Clearly, with a relatively fixed supply of fresh water, a rise in demand of this sort will impact the price of water everywhere.

Fresh water is not distributed equitably across population centers, nations or regions. Moreover, given its weight, water is not easy to transport in sufficiently large quantities. As population grows, supply and demand for water will become progressively more imbalanced especially in arid regions with contaminated water. For regions with easily accessible water resources like rivers and underground aquifers, the risk of overconsumption and inefficient recycling are real threats to the sustainability of these resources. These constraints pose a profit opportunity for firms in this index who have the know-how to efficiently treat and distribute water across the world.

Growth opportunities also exist for firms with a global presence and proximity to emerging market nations, especially with regards to sanitation. At the moment, roughly 2.6 billion people do not have access to proper sanitation. To combat this problem, emerging market economies have been active in delegating resources to improving and designing new infrastructure related to waste and water management. The World Bank estimates that Middle Eastern, Asian, and Mediterranean countries could spend upwards of USD1.5 trillion to upgrade their existing infrastructure. However, many national governments face long-run budgetary constraints and lack technical expertise in assuring project quality. In response to these challenges, municipal governments have turned to private industrial firms for waste removal and supply of drinking water through public-private partnerships. These partnerships, often operated under a DBFMO model in which the private partner designs, builds, finances, maintains and operates the facility, allow cash-strapped governments to outsource the financing and associated construction risks to the private sector.

Going forward, growth will be driven by global trends towards greater desalination and water reuse, water conservation, energy efficiency and enhanced technology. In order to accomplish these operations, massive investments in water-related infrastructure will be required as existing water systems are antiquated and inadequate. To the extent municipal governments can subsidise these infrastructure projects, firms in this index should benefit from these trends as a result of their technical expertise and global reach in these niche undertakings.

Indexkonstruktion

The S&P Global Water Index provides equity exposure to 50 companies that are involved in water related businesses around the world. In order to provide a well-diversified exposure, the index distributes the constituents equally between water utilities and infrastructure, and water equipment and materials—two distinct clusters of water-related businesses. The index is a modified cap weighted index which reduces single stock concentration. Companies with water-related business as their core competency are weighted according to their market capitalisation. Multi-industry companies with significant exposure to water related businesses are only weighted at half their market capitalisation. The index is rebalanced semi-annually and there are no intra-year index additions, and intra-year deletions will only occur if a component is de-listed. At each review date, each cluster is allocated a weight of 50% and single issuer exposure is capped at 10%. The largest single equity exposure is Geberi (~7%), followed by Pentair (~7%) and United Utilities (~6%).

Fondskonstruktion

The iShares S&P Global Water UCITS ETF uses full physical replication to track the S&P Global Water Total Return Index. The fund aims to track the performance of the reference index by owning all the constituent shares in the same weights as those stipulated by the index. To help further improve tracking performance, the fund engages in securities lending. In the 12 months through the end of September 2014, an average of 7% of the portfolio was out on loan. The lending programme added 3 basis points of net return to the fund. BlackRock, iShares’ parent company and lending agent, keeps 37.5% of gross securities lending revenue for itself, out of which amount it will pay the associated costs of the activity, and passes 62.5% of the revenue to the fund. To protect the fund from a borrower’s default, BlackRock takes collateral greater than the loan value. Collateral levels vary from 102.5% to 112% of the value of the securities on loan, depending on the assets provided by the borrower as collateral. This fund uses futures for cash equitisation purposes, which also helps to reduce tracking error.

Gebühren

The fund levies a total expense ratio (TER) of 0.65%. This lies in the middle of the range for ETFs tracking water-related equities. Moreover, the tracking difference (fund return – index return) over the past few years suggests that the annual cost of holding the fund tends to be lower than the TER. This implies that management costs are partially offset by revenues generated from efficient portfolio management techniques (e.g. securities lending) and through the use of tax optimisation (the fund enjoys a better withholding tax rate than the index). Additionally, ETF investors will typically be charged trading costs, including bid-offer spreads and brokerage commissions, when buy and sell orders are placed for ETF shares.

Alternativen

As of writing, there are two alternative ETFs providing equity exposure to water-related businesses.

The most popular alternative to the iShares fund, as measured by assets under management is the Lyxor ETF World Water ETF. The index tracked by the Lyxor fund is produced by Societe Generale and provides equity exposure to the 20 world’s largest companies in the water utilities, water infrastructure and water treatment categories, capping each constituent at 10% of the index total value. The Lyxor ETF uses synthetic replication and levies a TER of 0.60%.

Investors may also consider the PowerShares Global Water UCITS ETF which tracks the NASDAQ OMX Global Water Index and levies a TER of 0.75%.

Über den Autor

Kenneth Lamont  ist Fondsanalyst bei Morningstar.