The Invesco S&P Global Water Index ETF (CGW) is a passively managed exchange-traded fund (ETF) launched in May 2007, offering investors a convenient way to gain exposure to the Industrials – Water segment of the equity market. As passively managed ETFs continue to gain popularity among retail and institutional investors, CGW stands out due to its low costs, transparency, flexibility, and tax efficiency. These characteristics make it an ideal choice for investors seeking long-term growth in the water sector.
Sector ETFs, like CGW, provide investors with a diversified portfolio of companies within a specific sector, minimizing single stock risk and offering lower-risk exposure to a particular market segment. The Industrials – Water sector, one of 16 broad Zacks sectors, currently ranks 13th out of 16, placing it in the bottom 19%.
Index Details
CGW, sponsored by Invesco, boasts over $971.84 million in assets, making it a mid-sized ETF in its category. It seeks to replicate the performance of the S&P GLOBAL WATER INDEX, excluding fees and expenses. The index encompasses developed market securities involved in water utilities, infrastructure, equipment, instruments, and materials.
Cost Considerations
When selecting an ETF, cost is a critical factor. Lower expense ratios can significantly impact an ETF’s long-term performance, potentially outperforming more expensive counterparts with similar fundamentals. CGW has an annual operating expense of 0.56%, aligning with most peer products in the water ETF space. It also boasts a 12-month trailing dividend yield of 1.42% for income-seeking investors.
Sector Exposure and Top Holdings
While ETFs offer diversification benefits, investors should still review the underlying holdings. Thankfully, most ETFs are transparent, disclosing their holdings daily. American Water Works Co Inc (AWK) accounts for approximately 8.63% of CGW’s total assets, followed by Xylem Inc/ny (XYL) and Veralto Corp (VLTO). The top 10 holdings collectively represent about 52.72% of the ETF’s total assets under management.
Performance and Risk
CGW has demonstrated strong performance, gaining roughly 8.91% year-to-date and approximately 19.45% over the past year (as of September 9, 2024). Its share price has traded within a range of $44.46 to $59.88 over the last 52 weeks. The ETF’s beta of 0.99 and standard deviation of 18.38% over the past three years classify it as a low-risk investment in the water sector. With roughly 74 holdings, CGW effectively diversifies company-specific risk.
Alternatives
Invesco S&P Global Water Index ETF (CGW) carries a Zacks ETF Rank of 3 (Hold), based on factors like expected asset class return, expense ratio, and momentum. While CGW is a suitable option for those seeking exposure to the Industrials – Water sector, investors might explore other ETFs in this space.
First Trust Water ETF (FIW) tracks the ISE Clean Edge Water Index, while Invesco Water Resources ETF (PHO) follows the NASDAQ OMX US Water Index. FIW holds $1.75 billion in assets, while PHO manages $2.15 billion. FIW charges an expense ratio of 0.53%, while PHO charges 0.60%.
Overall, CGW presents a compelling opportunity for investors seeking exposure to the growing water sector. Its low costs, diversified holdings, and strong performance make it a worthy consideration for both long-term and short-term investment strategies.
