Tareno Global Water Solutions Fund in November 2024

Water Fund Report

November 2024

The November market perfor­mance was undoub­tedly influenced by the results of the US election. Donald Trump’s presi­den­tial win marks his return as the second presi­dent in US history to serve non-conse­cu­tive terms — 130 years after Grover Cleve­land. With this achie­ve­ment, only one record remains unique to Cleve­land: being the only presi­dent to marry while in office, at the White House.

As the Republican Party not only won the White House, but also majori­ties in both chambers of Congress, expec­ta­tions are high for policies aimed at bolste­ring the US economy and markets.

Outside the US, the election result was met with some caution. Emerging markets under­per­formed developed markets by several percen­tage points. Chinese equities declined due to concerns about a future trade conflict and the assess­ment that the previously announced govern­ment support measures are not yet suffi­cient to overcome the domestic real estate and confi­dence crisis.

The US dollar rally also had a signi­fi­cant impact on the relative perfor­mance of markets in November. The percep­tion that Trump’s fiscal plans could be infla­tio­nary and poten­ti­ally cut short the Federal Reserve’s (Fed’s) rate-cutting cycle led to the stron­gest conse­cu­tive monthly gains for the dollar in more than 2 years.

The Tareno Global Water Solutions Fund posted a perfor­mance of +4.19% (W‑EUR tranche) in November 2024.

Our month in the water sector

Looking at the under­lying funda­men­tals of our universe, the one that jumped out were Existing-Home-Sales in the US. After a streak of thirty-eight conse­cu­tive year-over-year declines that indicator turned a corner in October. At the same time, the Archi­tec­tural Billings Index, a key indicator of non-residen­tial construc­tion expec­ta­tions moved into expan­sion terri­tory for the first time since June 2023. Although it’s too early to call it a trend, this signs hint that the Fed’s easing policies might start to positively influence the construc­tion market. Compa­nies with signi­fi­cant exposure to the construc­tion market include Advanced Drainage Systems, Watts Water, Geberit and Georg Fischer.

The Republican sweep raises one clear question: what will the change in the admini­stra­tion mean for the EPA and the invest­ment in water infras­truc­ture more broadly? Some are certain that environ­mental protec­tions will be dismantled. Others are convinced that water will emerge as a source of bipar­tisan conci­lia­tion. We will soon see which of these predic­tions is correct. In the meantime, it is clear that there is little visibi­lity of regula­tion. Tetra Tech, an environ­mental consul­ting firm exposed to federal funding, lost about 20% in the after­math of the election. We must be patient here until the dust settles, but the move is clearly exces­sive. Even in firm red states like Florida and Texas, environ­mental regula­tors have a track record of taking water quality issues seriously. We see the poten­tial for a more quilted, state-led environ­mental regula­tion landscape as creating oppor­tu­ni­ties for upstream firms such as Tetra Tech.

A rever­sing trend

Have you ever heard of a company that saw its stock soar by an incre­dible 15% after they announced the sale of two-thirds of its business? This is exactly what happened to Georg Fischer! The acqui­si­tion of Uponor in November 2023 has positioned GF as one of the global leaders in sustainable Water and Flow Solutions! They are now addres­sing mission-critical solutions for industrial flow processes, sustainable water manage­ment in urban areas and energy effici­ency in buildings. A strategic evalua­tion revealed that these incre­dible growth oppor­tu­ni­ties can be best pursued by further adapting the company’s portfolio. This is why GF is going to focus entirely on Water and Flow Solutions for Industry, Infras­truc­ture and Buildings. This is in line with the exciting news that Du Pont will be split­ting into three separate compa­nies by the end of 2025. It’s water-tech business will be separated and go out there to compete with the likes of Xylem and Veralto – it’s an exciting new chapter!

Back in 2017, General Electric made the brilliant decision to focus on their core industrial businesses and divest slow-growth, low-tech and non-industrial processes. Can you guess what they divested in the process? Exactly – GE Water, which they sold to Suez, nowadays Veolia Water Techno­lo­gies & Solutions.

The exciting trans­for­ma­tion of water techno­logy is happe­ning right now! It is trans­forming from a cost centre to a valuable asset.

Top rating for our water fund

This November, the Tareno Global Water Solutions Fund was awarded the FNG-Label for the seventh time in a row and received three out of three possible stars for the second time. We are delighted to receive this award once again and are proud of the progress we have made at all levels of the sustaina­bi­lity process in recent years. In addition to the minimum requi­re­ments that must be met for the label, there is a so-called tier model in which up to three stars can be awarded in the areas of insti­tu­tional credi­bi­lity, product standards, selec­tion strategy, dialo­gues and key perfor­mance indica­tors. The Tareno Global Water Solutions Fund once again receives three out of three possible stars in all catego­ries.

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