Tareno Water Fund in December

Regula­tory environ­ment

No relevant new regula­tory develo­p­ments were recorded in December 2025. However, the continued strength in the municipal market segment, to which many compa­nies referred, indicates that the imple­men­ta­tion of the U.S. EPA’s revised Lead and Copper Rule and new PFAS requi­re­ments will continue to shape water utili­ties’ project pipelines and budget priori­ties. These factors are likely to support invest­ment activity over several years.

Conso­li­da­tion in the environ­mental consul­ting sector: WSP expands its US presence

WSP Global announced the acqui­si­tion of TRC Compa­nies for USD 3.3 billion on December 15, 2025. The transac­tion will make WSP the largest enginee­ring services provider in the US with around 27,000 employees. At the same time, the company is streng­thening its position in the Power & Energy segment, which is expected to account for around 34% of US net sales in the future.

The acqui­si­tion expands exper­tise along the entire water value chain, parti­cu­larly in the areas of environ­mental consul­ting and project manage­ment for water utili­ties. WSP is thus positio­ning itself to benefit from long-term infras­truc­ture invest­ments driven by regula­tory requi­re­ments, the need to renew existing systems and the incre­a­sing need for climate adapt­ation.

Impli­ca­tions for the water sector

The WSP transac­tion as well as current manage­ment comments and quarterly reports in the sector confirm several struc­tural develo­p­ments. The dovetailing between the energy and water sectors conti­nues to increase, parti­cu­larly in the context of electri­fi­ca­tion and data center growth. WSP expli­citly highlights Power & Energy as a growth pillar and positions water infras­truc­ture as a comple­men­tary compe­tence. Gorman-Rupp also points to incre­a­sing demand for fire protec­tion and cooling systems for data centers, which under­lines the struc­tural link between energy requi­re­ments, cooling and water demand.

At the same time, M&A remains a key strategic tool for scaled water infras­truc­ture compa­nies. The takeover of TRC by WSP and the acqui­si­tion of Canada Water­works by Core & Main show that market leaders use conso­li­da­tion in a targeted manner to expand their addressable markets, realize syner­gies and offer integrated solutions. The transac­tions continue to be carried out at disci­plined valua­tions; WSP paid around 12.5 times EBITDA inclu­ding syner­gies.

Demand visibi­lity in the municipal segment remains high. Manage­ment comments from Core & Main and Gorman-Rupp indicate that invest­ment activity in the public sector is well supported until at least mid-2026. This creates earnings visibi­lity for compa­nies with high public sector exposure and contrasts with more volatile develo­p­ments in the construc­tion and industrial sectors.

Capital alloca­tion signals confi­dence in balance sheet strength. Core & Main increased its share buyback program by USD 500 million, while Gorman-Rupp announced its 53rd conse­cu­tive dividend increase. Both compa­nies under­line their commit­ment to stable share­holder returns despite continued active acqui­si­tion strate­gies.

The margin trend also indicates a struc­tural impro­ve­ment in the quality of earnings in the sector. The gross margin expan­sion of 60 basis points at Core & Main shows that distri­bu­tors and manufac­tu­rers can increase their profi­ta­bi­lity through opera­tional disci­pline, higher private label shares and an optimized pricing archi­tec­ture. Gorman-Rupp reported compa­rable margin progress as a result of opera­ting leverage and effici­ency impro­ve­ments, indica­ting a sustainable norma­lization follo­wing the pandemic-related supply chain disrup­tions.

In contrast, exposure to residen­tial construc­tion remains a headwind in the short term. Both Core & Main and Gorman-Rupp point to continued weakness in the residen­tial construc­tion market, with Core & Main expec­ting a low double-digit decline in sales in this segment for the fourth quarter. However, the strength in the municipal and commer­cial sectors is having a compen­sa­tory effect and under­lines the importance of broad end market diver­si­fi­ca­tion.

Portfolio positio­ning and perfor­mance

Develo­p­ments in December underpin the portfo­lio’s core thesis that water infras­truc­ture benefits from long-term regula­tory cycles and repla­ce­ment invest­ments that are largely indepen­dent of short-term economic volati­lity. The quiet news flow with only two relevant earnings releases and one major M&A announce­ment across 42 positions is in line with typical seasonal patterns in the industrial and infras­truc­ture sector.

The WSP-TRC transac­tion remains a key monito­ring topic for the first quarter of 2026, parti­cu­larly with regard to integra­tion progress and finan­cing. Short-term share price volati­lity in connec­tion with capital measures should be viewed as a tactical factor within a strate­gi­cally convin­cing transac­tion.

The Tareno Global Water Solutions Fund recorded a perfor­mance of ‑1.31% (W‑EUR tranche) in December, closing a challen­ging year overall with an annual perfor­mance of ‑1.46%.

The geogra­phical and sub-sector diver­si­fi­ca­tion of the portfolio across enginee­ring service provi­ders, manufac­tu­rers, distri­bu­tors and regulated utili­ties conti­nues to ensure balance. The high municipal exposure compen­sates for the cyclical weakness in residen­tial construc­tion.