Jump Into Clean Water Investing

11/11/2015
Water

Summary

With less than 1% of the earth's water potable and global demand rising, we think the next great wave of investing could be in clean water. See how you can get your feet wet.

AWTAX

Morningstar Overall RatingSM

For Class A shares among 131 funds in the Natural Resources category as of 7/31/2017. Morningstar measures risk-adjusted returns. The overall rating is a weighted average based on the 3-, 5- and 10-year star ratings

AWTIX

Morningstar Overall RatingSM

For Class I shares among 131 funds in the Natural Resources category as of 7/31/2017. Morningstar measures risk-adjusted returns. The overall rating is a weighted average based on the 3-, 5- and 10-year star ratings

Did you know?

Farming accounts for 71% of global water consumption. Consider how much water it takes to produce one pound of:

  • Chicken = approx. 450 gallons
  • Beef = approx. 1,850 gallons
  • Coffee = approx. 2,250 gallons6

By 2050, the world’s population is expected to grow by three billion people—90% of whom will live in developing nations that are already experiencing water stress.7

Producing one gallon of ethanol requires almost 3,000 gallons of water.8

Global demand in 2030 will exceed currently available water supplies by 40%

Learn More

Why water

Fresh water has no substitute—and only a fraction of today's supply is safe for consumption. Given a fast-growing world population, the massive urbanization of developing nations and poor infrastructure in developed countries, the need for water is set to grow exponentially. Because of this global supply/demand imbalance, water is increasingly being viewed as a core commodity that could be as profitable as oil.

A Flood of Opportunity

  • Water is currently a $500-billion market that could grow to as much as $1 trillion by 2020.¹
  • Investments are needed along the entire water chain; water-infrastructure projects alone are expected to see annual growth of 5%-8%.¹
  • Companies that focus on addressing the increasing demand for and limited supply of water could represent some of the world's key growth opportunities today—and in the coming years.

H2O: The Way to Grow

H2O the way to grow

A hypothetical $1,000 investment in the S&P Global Water Index at inception (11/16/2001) would have grown 357%—far outpacing broader stock-market indexes.

Source: Morningstar Direct. Data as of 6/30/2015. Past performance is no guarantee of future results.



11/2001- 06/2015 Annualized Returns
S&P Global Water Index 11.81%
MSCI World Growth Index 6.32%
S&P 500 Index 6.55%

The information above does not represent Allianz Fund performance. Please click here for information concerning the AllianzGI Global Water Fund's performance and investment process.

Why now

Global water demand will be pushed 40% beyond accessible, reliable supplies by 2030 unless significant headway is made toward resolving the global water crisis.²

Areas of Development:

We have identified three main areas where governments and private corporations will have to devote substantial resources to help solve the growing water challenge. Each one provides a range of attractive water-related investment opportunities.

Expanding the water supply

Why?

1.1 billion people have inadequate access to water.³

Solution

Develop new water infrastructure to create a sustainable, reliable and cost-efficient supply system for developed and developing nations

Opportunity

  • Exploration costs, engineering and design
  • Well drilling
  • Runoff water-capturing facilities
  • Pumping stations and pipelines
  • Desalination equipment
  • Wastewater treatment plants for reuse or discharge
  • Construction materials

Increasing water-supply efficiency

Why?

32 billion cubic meters of treated water is leaked from water-supply systems every day4

Solution

Create effective solutions to reduce demand, lessen the need for capital-intensive solutions and promote sustainable use of available resources

Opportunity

  • Irrigation equipment to prevent evaporation of water in farming
  • Meters to stop waste
  • Drought-resistant crops or fertilizers
  • Automation controls
  • Leakage detection

Improving water quality

Why?

80% of China's rivers are too toxic for fish—let alone human consumption5

Solution

Increase regulations on drinking-water quality and establish minimum levels of treatment

Opportunity

  • Filtration
  • Monitoring and testing
  • Disinfection chemicals
  • Sanitary appliances
  • Wastewater technology

Why AllianzGI Global Water Fund

The team invests in companies facing the challenges of the increasing demand for—and limited supply of—clean water. You can't invest directly in water, so the portfolio managers invest in companies that are active in water management in sectors like industrials, utilities, construction, building materials, technology and chemicals. The portfolio managers typically aim to construct a concentrated portfolio of 25 to 50 stocks of high-quality companies with unique positions within the water-supply chain.

How this strategy can fit in a portfolio

  • Stable, predictable growth potential in a low-growth environment. Water demand is a long-term secular growth story, generally unaffected by economic conditions, political developments or changing consumer preferences.
  • A long-term, and potentially less-volatile play on growth in emerging-market economies. Water-infrastructure investment is a necessity for growth-related activities: generating electricity, growing agriculture, raising livestock, manufacturing and mining.
  • Access to active management. The fund's active-management approach can be forward-looking, and can take a strategic view of the issues facing and shaping the industry—providing opportunities that passive indexing may not. Of course, passive investing may involve lower fees and expenses, and it is possible for active portfolio managers to negatively affect portfolio performance with their stock selections.

Get Started

Investors looking to capitalize on the water challenge may want to consider AllianzGI Global Water Fund, which seeks long-term capital appreciation from equity securities of water-related companies worldwide that have unique positions in the water-supply chain.

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The Pros and Cons of Risk

11/20/2015

Summary

They say there are two sides to every story. The same is true for risk. Watch our new video and discover how Allianz Global Investors can help you see risk differently. It's not just a challenge—it can also be an opportunity.

 


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