The Invesco Water Resources ETF (PHO) was launched on 12/06/2005, and is a smart beta exchange traded fund designed to offer broad exposure to the Industrials ETFs category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
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 $2.06 billion, this makes it one of the larger ETFs in the Industrials ETFs. PHO is managed by Invesco. This particular fund, before fees and expenses, seeks to match the performance of the NASDAQ OMX US Water Index.
The NASDAQ OMX US Water Index tracks the performance of US exchange-listed companies that create products designed to conserve and purify water for homes, businesses and industries.
Cost & Other Expenses
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Annual operating expenses for PHO are 0.59%, which makes it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 0.56%.
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.
This ETF has heaviest allocation in the Industrials sector - about 48.8% of the portfolio. Information Technology and Healthcare round out the top three.
When you look at individual holdings, Roper Technologies Inc (ROP) accounts for about 8.43% of the fund's total assets, followed by Ecolab Inc (ECL) and Waters Corp (WAT).
The top 10 holdings account for about 53.41% of total assets under management.
Performance and Risk
Year-to-date, the Invesco Water Resources ETF has added about 2.64% so far, and is down about -0.02% over the last 12 months (as of 08/13/2026). PHO has traded between $64.15 $74.61 in this past 52-week period.
PHO has a beta of 0.96 and standard deviation of 16.41% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 44 holdings, it has more concentrated exposure than peers .
Alternatives
Invesco Water Resources 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.
Invesco S&P Global Water Index ETF (CGW) tracks S&P GLOBAL WATER INDEX and the First Trust Water ETF (FIW) tracks ISE Clean Edge Water Index. Invesco S&P Global Water Index ETF has $1.07 billion in assets, First Trust Water ETF has $1.92 billion. CGW has an expense ratio of 0.58% and FIW changes 0.50%.
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 Water Resources ETF (PHO): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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