When thinking of ETFs in t he commodity sector most investors think of Oil and metals. There is a commodity that investors may not be aware of that is posting good returns. That commodity is water There is a growing world demand for clean water worldwide. In the US the aging infrastructure that delivers water needs to be replaced.

One ETF that takes advantage of these investment opportunities is Powershares Water Resources (PHO). With many exchange traded funds down or just treading water for the year so far, PHO is performing above average. As of July 6th it is up over 9% which is not bad for the recent market conditions. While gold and oil related ETFs are currently performing better, their volatility is much greater and next month could be a different story.

The Powershares Water Resources Portfolio is based on the Palisades Water Index?. The Index seeks to identify a group of companies that focus on the provision of potable water, the treatment of water and the technology and service that are directly related to water consumption. This industry has become a $260 billion plus industry. As time goes by this industry is sure to grow even larger.

The Environmental Protection Agency estimates that in the US over the next two decades over $500 million will be spent to upgrade or replace public water supplies.

On a worldwide basis rapid industrialization and increasing agricultural needs have contributed to a worldwide water shortage. China, India, Egypt, Israel, Pakistan, Mexico and parts of the American southwest are just a few of the areas that have experienced water shortages.

In addition another problem has been the contamination of existing water supplies. In the United States fertilizer runoff into the gulf has caused a large problem. MTBE an additive in unleaded gasoline is showing up in well water from one end of the country to the other. There have been many more documented cases of water pollution in countries outside of the US. Of course every time there is a contamination incident, the supply of fresh water available for human consumption is diminished.

For investors the question is how to take advantage of this space. Before Powershares PHO an investor could invest in utility funds of individual stocks. Both of these methods are hit and miss. Utility funds are much more heavily weighted toward companies that are not involved in the water industry. The only other way to invest in this industry was to invest in individual stocks. This method has its risks because the water industry is so broad based and picking the right stock at the right time is not a particularly easy task.

Powershares ETF is based on the Palisades Water Index. The 30 or so companies included in PHO include everything from watershed management to developing more cost effective water treatment systems. The Fund is diversified across six different groups in the water industry. At this time Powershares PHO is the only ETF focused on this industry.