Pictet Water fund

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High exposure to the theme

The average exposure to the water theme within the portfolio is above 60%

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Deeper insight

Members of the team are very experienced, with some having environmental engineering and chemistry backgrounds

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Expert oversight

A Water Advisory Board consisting of recognised experts helps to oversee the investment process

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Strong performance

Despite being a thematic fund it has delivered an annualised return of over 9% since it was launched

The Fund

Pictet Water was launched in 2000 and aims to invest in companies providing water supply or processing services, or water technology and environmental services. The team are highly regarded in this area, with some of the team holding PhDs and postgraduate qualifications in Environmental Engineering and Environmental Chemistry, allowing a deeper level of insight to support the fund.

The fund has a Water Advisory Board consisting of recognised experts in their respective field; often coming from non-government organisations, academia or the private sector. Their role is to help the investment managers track the evolution of the water theme, whilst also identifying and defining new trends and themes.

The intent of the Water fund is to allocate capital to companies developing solutions to global water challenges. As a result, this should generate attractive sources of returns for investors whilst also having a positive impact on society and the environment.

Water

It’s thought that the water theme is underpinned by five megatrends, including:

  • Focus on health
  • Demographic development
  • Sustainability
  • Economic growth, and
  • Commercialisation.

Some of the trends supporting these are the increase in urban demand for municipal waste; 10% of global burden of disease coming from water, sanitation and hygiene related diseases; and an increase in the percentage of the global population living in water-scarce areas.

The team constructs their investment universe on three different niches; water technology, water supply and environmental services, accounting for 55%, 33% and 10% of the portfolio respectively. In order for a company to be included in the portfolio, it needs to have at least 20% exposure to the overall water theme. This may seem low, but the average exposure of the portfolio to the water theme is above 60% so it’s clear to see that the underlying holdings are generally well-aligned.

With increasing water stress being witnessed on a global scale, there’s a strong need for more water infrastructure investment. It’s estimated that $41tn is needed in total urban infrastructure over 2005-2030, of which over $22tn is for water. This clearly creates investment opportunities for both companies and investors.

 

Example holdings

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Holding
What they do
Xylem The leading global water technology company, operating in a $40bn market. They enable customers to transport, treat, test and efficiently use water in more than 150 companies.
American Water The largest US water and wastewater utility, operating in 47 states and serving 15 million people.
Woongjin Coway A market leader in premium home wellness appliances. It focuses on addressing consumer safety concerns through water and air purification, delivered via an innovative door-to-door sales and rental model.

The fund provides good exposure to the water theme, with the average exposure of the portfolio to the theme being more than 60%. In addition to this, five out of the top ten companies have 100% exposure.