ETFs Tendencies’ CEO Tom Lydon discusses the Invesco Water Resources ETFs (OPS ) this week ETFs podcast of the week with Chuck Jaffe from the MoneyLife Show.
Lydon begins by discussing increasing global warming, ongoing droughts, and the impacts of water scarcity on crops and food supply.
“Just a few years ago, we saw the United States launch a water futures market in California so that farmers could hedge against the risk of resource scarcity,” Lydon says. “More than 70% of surface water in places like India and 70% of groundwater in China have been deemed unfit for human consumption.”
World Economic Forum estimates have concluded that more than $26 trillion will be spent on water supply by 2030, reflecting the urgency of water scarcity and the growing need to find solutions for water supply. water in a warming world.
OPS is based on the NASDAQ OMX US Water Index, which contains public water companies that focus on areas such as water utilities, machinery, life science tools and services, and many others.
Although it is a natural resource fund, OPS is not one to invest in the same way that investors would allocate to more traditional resources funds related to materials or mining, says Jaffe. Water scarcity and water problem will be permanent problems in the future, and OPS is a unique fund in its targeted approach to water companies and offers an opportunity for portfolio diversification.
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Some long PHO performance
The fund has a strong long-term performance, but because it is somewhat commodity-based and thematic in nature, it is currently down relative to much of the rest of the market. Lydon believes that investing in utilities helps mitigate volatility for OPS.
“I would see it this way: Everyone today, depending on what’s going on in the world, has been forced to be very picky about the components of their portfolio,” Lydon says. It’s a good fund if you’re looking for an allocation “that would help diversify your portfolio, first, but also allow you to take advantage of any trends that may develop”.
Allocation of 3-5% of an equity investor’s portfolio to OPS would give the portfolio diversification thanks to its lack of correlation to the S&P 500, Lydon says. OPS is one of the first ETFs launched that focused on investing in water-related businesses and outlasted almost all other funds in its class. This type of longevity is often overlooked in the ETFs industry but deserves attention and reflects Invesco’s commitment to the thesis.
“At Invesco, they’ve seen the merits of this theme, the water theme, over a long period of time, and if you actually go into Invesco, there’s a whole following in this category that approaches it from different manners,” Lydon adds.
For more podcast episodes featuring Tom Lydon, visit our podcasts category.