Water is the world's most abundant commodity. But for investors it tends to be a wash out.
That disconnect struck the team behind the Calvert Global Water Fund as a potential source of profits.
Global climate change, increasing demand for clean water in emerging and frontier markets, and aging pipes and pumps in the United States and Europe should help make water increasingly important in the global economy, said Matthew Sheldon, a co-portfolio manager of the $407 million fund.
"When we started looking into it, we realized that this is a trend that will be around for not just the next several years but several decades," Sheldon said.
Yet few other funds are focusing on this market, even as the World Bank estimates that global population growth will require the world's water supplies to grow by about half by 2050.
There are only five water-focused mutual funds and exchange traded funds, including the Calvert fund, according to Lipper data. When hedge funds are included, total invested assets focused solely on water amount to less than $10 billion, analysts say.
Calvert Global Water Fund, which has gained an average of 14.3 percent during each of the last three years, won a 2014 U.S. Lipper Fund Award in the global natural resources category in part because its portfolio differs from many of its peers, said Jeff Tjornehoj, the head of Lipper Americas Research.
"It has done an excellent job producing way-above-average returns with only average amounts of risk," he said.
Sheldon, who is part of the five-member management team based in Ireland, said his fund largely splits its bets between four different types of companies.
These include companies increasing the water supply through desalination or irrigation; those decreasing demand through plumbing or leak detection; companies improving water quality; and those expanding or fixing pipes and pumps.