Water ETF Investors Left Parched as California Suffers DroughtDavid Wilson
Investors in U.S. exchange-traded funds focusing on water have something in common with residents of California and other regions experiencing droughts: they are suffering this year.
The attached chart compares this year’s performance of two ETFs, the PowerShares Water Resources Portfolio and the First Trust ISE Water Index Fund, with an ETF tracking the Standard & Poor’s 500 Index.
Shares of the water ETFs fell 1.1 percent and 3.9 percent, respectively, for the year through yesterday. The SPDR S&P 500 fund gained 2.9 percent in the same period, as the chart shows.
Mandatory water cutbacks in California, where Governor Jerry Brown ordered a 25 percent reduction in use on April 1, have hurt shares of utilities that serve the state. California Water Service Group, based in San Jose, fell 4 percent through yesterday from a peak on Jan. 29.
Water-equipment suppliers, accounting for the bulk of the PowerShares and First Trust ETFs, have slumped as well. Shares of Energy Recovery Inc. and Layne Christensen Co., included in both ETFs, dropped more than 30 percent this year as lower oil prices hurt demand from energy companies.
About 3.6 percent of the country experienced exceptional drought conditions, the highest reading on a scale used by the U.S. Drought Monitor, as of last week. The area included about half of California and parts of Nevada, Oklahoma and Texas.