Is Invesco Global Water ETF (PIO) a Strong ETF Right Now?
A smart beta exchange traded fund, the Invesco Global Water ETF (PIO) debuted on 06/13/2007, and offers broad exposure to the Industrials ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
Because the fund has amassed over $294.12 million, this makes it one of the average sized ETFs in the Industrials ETFs. PIO is managed by Invesco. This particular fund, before fees and expenses, seeks to match the performance of the NASDAQ OMX Global Water Index.
The NASDAQ OMX Global Water Index is designed to track the performance of companies worldwide that are creating products that conserve and purify water for homes, businesses and industries.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Operating expenses on an annual basis are 0.75% for this ETF, which makes it one of the most expensive products in the space.
It's 12-month trailing dividend yield comes in at 0.76%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
Looking at individual holdings, Pentair Plc (PNR) accounts for about 8.30% of total assets, followed by Veralto Corp (VLTO) and Danaher Corp (DHR).
The top 10 holdings account for about 54.3% of total assets under management.
Performance and Risk
The ETF has added about 7.13% so far this year and was up about 26.15% in the last one year (as of 03/28/2024). In the past 52-week period, it has traded between $31.37 and $42.50.
The ETF has a beta of 1.02 and standard deviation of 18.18% for the trailing three-year period, making it a medium risk choice in the space. With about 47 holdings, it has more concentrated exposure than peers.
Alternatives
Invesco Global Water ETF is a reasonable option for investors seeking to outperform the Industrials ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
First Trust Water ETF (FIW) tracks ISE Clean Edge Water Index and the Invesco Water Resources ETF (PHO) tracks NASDAQ OMX US Water Index. First Trust Water ETF has $1.63 billion in assets, Invesco Water Resources ETF has $2.12 billion. FIW has an expense ratio of 0.53% and PHO charges 0.60%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Industrials ETFs.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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Invesco Global Water ETF (PIO): ETF Research Reports
Danaher Corporation (DHR) : Free Stock Analysis Report
Pentair plc (PNR) : Free Stock Analysis Report
First Trust Water ETF (FIW): ETF Research Reports
Invesco Water Resources ETF (PHO): ETF Research Reports
Veralto Corporation (VLTO) : Free Stock Analysis Report
