From politics to portfolio

Develo­p­ments in January confirm the central invest­ment thesis of the Tareno Global Water Solutions Fund. Both in the USA and in Europe, the regula­tory frame­work conti­nues to ensure multi-year planning and invest­ment security, parti­cu­larly in the areas of municipal water treat­ment, flood protec­tion and environ­mental remedia­tion. At the same time, struc­tural growth drivers, above all the expan­sion of data centers and the use of artifi­cial intel­li­gence, are funda­men­tally changing industrial water demand without reducing it.

For the portfolio, this environ­ment means a tailwind for compa­nies that are active in essen­tial infras­truc­ture, advanced proces­sing techno­lo­gies and specia­lized enginee­ring and consul­ting services. The decisive factor here is that these demand stimuli are largely indepen­dent of short-term economic fluctua­tions and there­fore support stable cash flows and long-term value creation.

Portfolio activity during the month

The company figures from the water sector published in January confirmed a diffe­ren­tiated market environ­ment overall. While A. O. Smith reported pressure on margins due to rising steel costs and subdued develo­p­ment in China, demand in the commer­cial sector was stable. Tetra Tech was parti­cu­larly convin­cing, with rising margins, a growing inter­na­tional order backlog and an increased forecast for the year.

At the same time, the announced change in leader­ship at Tetra Tech marks a signi­fi­cant turning point: Dan Batrack, the longest-serving CEO among our long-standing portfolio positions, is handing over to his internal successor Roger Argus after almost two decades at the helm of the company. Batrack’s tenure has been charac­te­rized by an excep­tio­nally strong track record of consi­stent profit growth and sustained share­holder value creation over multiple market cycles. The internal succes­sion solution is seen as an expres­sion of conti­nuity, especi­ally as Batrack will remain with the company as Execu­tive Chairman.

In contrast, Sika and Geberit signaled continued margin pressure, while Hawkins confirmed its struc­tural growth path in the water treat­ment sector. Overall, the results support our portfolio orien­ta­tion in favor of regula­tion-driven infras­truc­ture and service models with high visibi­lity.

Portfolio manage­ment remained disci­plined in January. With incre­a­sing market volati­lity and after indivi­dual positions had tempo­r­a­rily outper­formed the under­lying funda­men­tals, exposure was selec­tively reduced where valua­tions appeared less attrac­tive.

Speci­fi­cally, positions in Watts Water, Mueller Industries, Andritz and ACEA were reduced. All four compa­nies continue to benefit from strong struc­tural demand drivers, but the share price develo­p­ment had overtaken the funda­mental develo­p­ment in the short term. The adjust­ments under­line the focus on risk manage­ment and valua­tion disci­pline without calling into question the long-term convic­tion in these business models.

In other parts of the portfolio, core positions were retained and selec­tively increased where market fluctua­tions opened up attrac­tive entry oppor­tu­ni­ties.

Balan­cing Oppor­tu­nity and risks in a volatile markets

Even though the medium to long-term outlook for the water sector remains positive, existing risks are being closely monitored. Diffe­ring regula­tory timeta­bles between regions can affect the visibi­lity of indivi­dual projects, parti­cu­larly for PFAS-related invest­ments. In addition, experi­ence shows that the reporting season leads to increased share price fluctua­tions, even for compa­nies with solid funda­men­tals. Major projects in the infras­truc­ture sector also naturally entail imple­men­ta­tion risks.

The portfolio counters these factors with broad geogra­phical and sectoral diver­si­fi­ca­tion, active position manage­ment and a consi­stent focus on balance sheet quality and cash flow visibi­lity.

Fund perfor­mance and outlook

The Tareno Global Water Solutions Fund achieved a perfor­mance of +4.99% (share class W‑EUR) in the reporting period. The perfor­mance was positive across all regions. With incre­a­sing volati­lity in large-cap US equities – parti­cu­larly in the techno­logy sector – investor interest shifted incre­a­singly to smaller and medium-sized compa­nies and to markets outside the USA. Europe and Japan in parti­cular proved robust in January.

The stron­gest contri­bu­tions came from the infras­truc­ture and industrial sectors. Compa­nies from the pumps, piping and environ­mental consul­ting segments stood out in parti­cular. The main contri­bu­tors to perfor­mance included Mueller Industries, Ebara, Gorman-Rupp and Kurita Water.

Looking ahead, February will be dominated by the reporting season. The funda­mental starting position in the portfolio remains solid and valua­tions appear attrac­tive. At the same time, the recent past has shown that even minor surprises can trigger signi­fi­cant market reactions. Against this backdrop, we expect an oppor­tu­nity-rich environ­ment for active portfolio manage­ment and remain clearly focused on long-term value creation – beyond short-term market signals.

Total return since fund incep­tion to 31.01.2026