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