ETF Showdown: All Wet As Water ETFs Battle

For those that aren't adrenaline junkies, this volatile market environment can be real pain in the neck. It is made even worse by relatively few options in terms of places to hideout. Looking at individual stocks or equity-based ETFs, the refuge options dwindle even further. On the surface, water stocks and the ETFs that track them (there are a few) would seem like sound options for conservative investors in this volatile market, but the water investment thesis demands further investigation beyond merely assuming these are conservative stocks or that they will perform “less bad” than the broader market. With that, this week's ETF Showdown between the Guggenheim S&P Global Water Index Fund CGW and the PowerShares Global Water Portfolio PIO is well-timed, though what we discover might be a surprise to some. For a while now, the allure of water stocks and ETFs like CGW and PIO has been easy to explain. The world population is growing and emerging markets demand is crimping water supplies. This is expected to be a long-lasting scenario. Put another way, as is the case with food, there simply isn't enough drinkable water in the world to meet current and future demand. Investors have bought into the water shortage thesis as CGW has $212.5 million in assets under management while PIO boasts $294.4 million and that's despite the fact that neither have particularly low expense ratios (PIO's is 0.75% and CGW's is 0.65%). PIO does live up to its billing as a global play as the U.S. accounts for about 31% of the ETF's country weight. Japan and the U.K. are the only other double-digit allocations, combing for over 23%. To PIO's credit it does a good job of mixing in weights to all three market caps (large, mid and small) along with value and growth names. CGW is also global in its approach, but the U.S. looms larger at about 39% of the ETF's weight. The U.K. and Switzerland combine for another 31%, but there is some slight emerging markets exposure with small allocations to Brazil and China. CGW holds 49 stocks compared to 29 for PIO though neither ETF is excessively allocated to just two or three water names. Those are the vitals on two of the most popular water ETFs on the market, but even more vital is performance and that's where both CGW and PIO are all wet. CGW is down almost 10% year-to-date while its rival is down more than 16%. Water has been referred to as “blue gold” though buyers of PIO or CGW a few months were proably sold fools gold. Yes, there is a legitimate global water shortage. When that starts to trickle down to water ETFs is anyone's guess. Only the most patient of investors should avail themselves of PIO or CGW in the near-term. This Showdown is a draw.