Invesco S&P Global Water Index ETF: A Fund for Water Infrastructure Exposure

The Invesco S&P Global Water Index ETF (NYSEARCA:CGW) is a passively managed fund that tracks the S&P Global Water Index, providing exposure to companies involved in water-related technology development and management. The fund focuses on companies that participate in the water infrastructure sector, such as those involved in water treatment, desalination, and water storage. CGW offers investors a diversified portfolio of water infrastructure companies, providing a unique investment opportunity in a sector with growing demand for sustainable water management solutions.

The Invesco S&P Global Water Index ETF (NYSEARCA:CGW) is a passively managed fund that tracks the S&P Global Water Index, providing investors with exposure to companies involved in water-related technology development and management. Launched in 2007, CGW focuses on companies that participate in the water infrastructure sector, including water treatment, desalination, and water storage. This ETF offers investors a diversified portfolio of water infrastructure companies, presenting a unique investment opportunity in a sector with growing demand for sustainable water management solutions.

Fund Overview and Strategy

CGW is designed to track the S&P Global Water Index, which includes large-cap companies with significant exposure to water-related businesses. The index is rebalanced semiannually in April and October, ensuring that the fund remains aligned with the latest market conditions. The fund's expense ratio is 59 basis points (bps), and it has $1.01 billion in assets under management (AUM) CGW: Sector ETF For Water Infrastructure Exposure^[1].

Geographical and Sector Diversification

CGW exhibits significant geographical diversification, with the United States accounting for approximately 60% of the total portfolio weight. The fund is also exposed to the United Kingdom (11.80%), Brazil (8.33%), and Switzerland (7.33%). In terms of sector exposure, industrials and utilities make up the majority of the portfolio, with 46.74% and 43.35% of the total weight, respectively CGW: Sector ETF For Water Infrastructure Exposure^[1].

Top Holdings and Concentration

The top 10 holdings in CGW account for 55% of the total portfolio weight, while the bottom 10 holdings make up only 0.87% of net assets. This concentration is reflected in the fund's top holdings, which include Xylem Inc. (XYL) at 8.85%, American Water Works Co. (AWK) at 7.61%, and Cia de Saneamento Basico do Estado de Sao Paulo SABESP (SBS) at 6.38% CGW: Sector ETF For Water Infrastructure Exposure^[1].

Performance and Distribution

CGW pays a relatively appealing distribution rate of $1.23 per share, yielding 1.91% on a trailing twelve-month basis. This compares favorably to the 1.08% yield in the S&P 500 ETF (SPY). The fund's distributions have generally exhibited growth over the years, providing investors with a moderately appealing income component CGW: Sector ETF For Water Infrastructure Exposure^[1].

Comparison with Peer ETFs

CGW is one of the larger water sector ETFs, with $1.01 billion in net assets. Compared to its peer, the First Trust Water ETF (FIW), CGW has a lower expense ratio (59 bps vs. 51 bps) and a higher concentration to the top 10 holdings (55% vs. 40.88%). However, FIW has outperformed CGW over longer historical holding periods and has moderately underperformed when comparing 1-year performance CGW: Sector ETF For Water Infrastructure Exposure^[1].

Risks and Considerations

As a passively managed, indexed strategy with narrow sector exposure, CGW may expose investors to certain risks. Investors should be aware that the fund will not deviate or take a defensive position during periods of market stress. Additionally, the fund's average price/earnings (P/E) ratio of 20.75x is a relative discount to the current multiple of the S&P 500, but it trades at a premium relative to the utilities sector ETF (XLU) CGW: Sector ETF For Water Infrastructure Exposure^[1].

Conclusion

The Invesco S&P Global Water Index ETF (NYSEARCA:CGW) is a sector-focused ETF strategy designed to provide investors with exposure to companies that participate in the development and management of water infrastructure and technology. The fund's unique focus on water-related businesses and its diversified portfolio make it an appealing choice for investors seeking exposure to the growing demand for sustainable water management solutions. However, investors should consider the fund's concentration risks and the potential for market stress before making an investment decision.

References

CGW: Sector ETF For Water Infrastructure Exposure^[1] https://seekingalpha.com/article/4828872-cgw-sector-etf-for-water-infrastructure-exposure