Another successful year for our water fund
December 2024
Following the US Presidential election in November, which was a source of global market excitement, the markets ended the year on a more subdued note. The major shock for the month was the Fed’s shift in guidance on monetary policy. Before the Fed’s final policy meeting of the year, investors were relatively convinced that they would continue to cut rates consistently through 2025. However, the Fed materially changed its tone on the outlook. The central bank now expresses greater caution regarding the inflation outlook and has guided the market to anticipate only two rate cuts in 2025 instead of the previously anticipated four cuts. Consequently, global equities concluded the year in a weak state, with losses in most markets.
The Tareno Global Water Solutions Fund recorded a performance of -3.24% for the month (W-EUR Tranche). Despite this, the year was concluded with a performance of +17%.
Review 2024: solid growth for the water sector
The water sector demonstrated respectable growth in 2024, though it lagged the broader equity markets, where technology companies once again led the charge in a narrowly focused market. Performance across the sector varied during the year. Municipal water and wastewater infrastructure spending remained strong, providing a solid foundation. Infrastructure investment saw robust momentum in regions such as the U.S., Europe, and the U.K., supported by significant public and private sector funding. In contrast, industrial activity in developed economies was less dynamic, resulting in slower-than-expected capital and operational investment within the water sector. Higher interest rates imposed constraints on residential and commercial construction, curbing water-related expenditures across global markets. Finally, low agricultural commodity prices reduced the profitability of farmers in key regions like the U.S. and Brazil, dampening spending on irrigation systems and technologies.
Adhering to fundamental principles has been instrumental in the success of our investment strategy this year.
New priorities: how politics and business are putting water at the centre
Fuelled by El Niño, 2024 has been marked by unprecedented global heat, with temperature records being broken for 15 consecutive months. Warmer climates have intensified storms, hurricanes, droughts and flooding. While some of these events are attributable to a warming climate, this is not the case for all of them. Many of the world’s water problems are self-inflicted wounds. Poor management, misguided engineering solutions, ill-advised decisions regarding infrastructure development, and ineffective leadership have compounded the challenges posed by a destabilising ecosystem. While the situation is pressing, there are encouraging developments. Water has become a priority for various stakeholders. The EPA has unveiled a long-awaited regulation and timeline for the removal of PFAS, and the EU Council has incorporated water resilience into its five-year agenda, recognising the bloc’s need to address water pollution and scarcity.
While we are hesitant to use buzzwords, significant changes are underway. This year has seen companies prioritising water. For instance, Kemira divested its Oil&Gas business to prioritise water, while Georg Fischer sold all assets except their water business to focus solely on flow technology.
Infrastructure and innovation: positive outlook for the water sector
We maintain a positive outlook for the water sector in 2025. In the municipal sector, significant investments in developed markets are likely to drive robust earnings growth for utilities and engineering firms involved in municipal initiatives. Key drivers of this growth are expected to include infrastructure modernisation, efforts to enhance resilience, compliance with PFAS-related standards, and the replacement of lead pipes. Legislative measures such as the U.S. Infrastructure Investment and Jobs Act (IIJA) and the U.K.’s AMP 8 are expected to provide substantial policy support. With a significant portion of the IIJA funding for water infrastructure projects yet to be disbursed, an increase in spending is anticipated in the coming years, creating a favourable environment for companies such as Tetra Tech, Clean Harbors and Veolia.
Industrial markets are expected to recover in 2025 as uncertainties related to interest rates and political events diminish. We anticipate an escalation in the involvement of the private sector in financing water-related infrastructure, driven by robust demand from AI-driven investments in data centres, semiconductor manufacturing, and power generation facilities, which require substantial water technology. We identify companies such as Georg Fischer, Kurita Water, and Pentair as potential beneficiaries.
Residential and non-residential markets persistently face challenges from elevated interest rates, particularly in the US. However, we anticipate a moderate improvement in new construction and home sales, as well as a rebound in repair and renovation activities later in the year. In Europe, residential and non-residential construction activity is expected to gain momentum as the year progresses and interest rates are further cut by the ECB. We favour companies such as Wienerberger, Geberit, A.O. Smith and Advanced Drainage Systems.
The agricultural equipment sector, especially for original equipment manufacturers (OEMs), is likely to face headwinds in 2025, with the long-term outlook for irrigation equipment remaining promising but near-term catalysts lacking.
We acknowledge the potential uncertainties around environmental policies, trade tariffs, and government expenditure, but we strongly believe that bipartisan support for water investments remains robust.
We extend our warmest wishes for a prosperous and fulfilling New Year, both personally and professionally.

Would you like to learn more?
Do you have questions about the report or would like to find out more about the Tareno Global Water Solutions Fund? Please do not hesitate to contact us.
Responsible
Stefan Schütz
Fund Manager
s.schuetz@tareno.ch
Disclaimer
This information is not intended as an offer or solicitation with respect to the purchase or sale of shares of the Variopartner SICAV-Tareno Global Water Solutions Fund. Please be aware that investment funds involve investment risks, including the possible loss of the principal amount invested. For a detailed description of the risks in relation to each share in the investment fund, please see the prospectus. Investments of the Luxemburg Variopartner SICAV-Tareno Global Water Solutions Fund should be made due to the fund’s latest prospectus, the statutes, the latest annual report and, if applicable, the half-yearly report. These documents are available free of charge from the domicile of the fund at 33, rue Gasperich, L-5826 Hesperange, Luxemburg, or from Vontobel Fonds Services AG, Dianastrasse 9. CH-8022 Zürich, Switzerland and Bank Vontobel AG, Zürich, Switzerland.
Pictures: Jürg Kaufmann, Marijke Vosmeer, Istock, Unsplash, Pixabay