The Invesco Water Resources ETF (PHO) is one of the oldest and largest water-themed ETFs, operating since 2005. It utilizes a modified liquidity-weighted strategy to provide diversified exposure across the entire water value chain.
Investors and institutions usually choose PHO because it offers a unique blend of defensive utilities along with water-related machinery, chemical, and infrastructure companies like Danaher, Ferguson, and American Water Works.
However, for long-term Indian investors, PHO carries a critical structural risk: The US Estate Tax. If you hold US-domiciled assets (like PHO) and your portfolio value exceeds $60,000, the US government levies a 40% Estate Tax on the excess amount upon your death. This creates an unnecessary risk that can wipe out nearly half of the wealth intended for your heirs.
This blog gives you all the information you need about the top UCITS alternatives. While PHO restricts its investments exclusively to US companies and tracks a proprietary US index, the alternatives listed below offer a broader global approach. By tracking global benchmarks like the S&P Global Water Index or the MSCI ACWI IMI Water index, these alternatives capture the exact same water mega-trends and provide better geographic diversification without the risk of the US Estate Tax.
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Why Indians are looking for UCITS alternatives to PHO
Indian investors are shifting to UCITS alternatives because they solve the tax risks and inefficiencies of US ETFs like PHO while providing similar thematic exposure.
- Estate Tax Protection: UCITS funds are typically domiciled in Ireland or other European jurisdictions. They are not considered "US-situs" assets, meaning they are 100% exempt from the 40% US Estate Tax.
- Tax Deferral (Accumulation): Unlike PHO, which forces taxable cash dividends on you, many UCITS funds offer "Accumulating" classes that reinvest dividends automatically. This reduces your tax liability in India and defers it until you sell the fund.
To learn more about UCITS ETFs and why Indian investors are choosing them, read our guide on UCITS ETFs.
Popular UCITS Alternatives for PHO
The Invesco Water Resources ETF (PHO) is the oldest and largest water-focused ETF, offering high liquidity and a track record dating back to 2005. It tracks the NASDAQ OMX US Water Index using a modified liquidity-weighting methodology to target companies that conserve and purify water. By prioritizing industrial machinery, infrastructure, and technology stocks over traditional regulated utilities, PHO provides investors with a defensive growth profile driven by the non-cyclical demand for global water management.
Here are the top four UCITS funds that serve as the best accumulating proxies for the US Water market.
1. L&G Clean Water UCITS ETF
Offers a broader global approach to the water crisis than PHO, focusing heavily on engineering and clean water technology, purely in an accumulating structure.
While PHO is heavily concentrated in the US market, GLUG offers a global approach to the water industry. It targets companies actively engaged in water utilities, engineering, and technology worldwide. Since water scarcity and infrastructure modernization are global challenges, expanding beyond the US provides better geographic diversification while maintaining the core theme. As an accumulating fund, it efficiently reinvests dividends, ensuring maximum compounding without triggering taxable distribution events.
- Ticker: GLUG (LSE)
- Total Expense Ratio (TER): 0.49%
- Structure: Accumulating (Reinvests dividends)
- Top Holdings: Xylem, American Water Works, Tetra Tech, Ecolab, Severn Trent.
2. Amundi MSCI Water ESG Screened UCITS ETF (Acc)
The largest water strategy in Europe (formerly under Lyxor), strictly tracks an MSCI index with built-in ESG screening, ensuring exposure only to highly sustainable companies.
Originally managed by Lyxor and now under Amundi, this is one of the most popular water strategies in Europe. Unlike PHO, which tracks a proprietary NASDAQ US index, AWAT tracks the MSCI ACWI IMI Water ESG Filtered Index. This ensures you only invest in companies with strong sustainability profiles, highly relevant for a resource-focused theme like water. This specific version uses an Accumulating structure, automatically reinvesting all payouts to offer a tax-deferred compounding vehicle for long-term investors.
- Ticker: AWAT (LSE) / WATC (Xetra)
- Total Expense Ratio (TER): 0.60%
- Structure: Accumulating (Reinvests dividends)
- Top Holdings: Geberit AG, Xylem Inc, American Water Works, Ferguson PLC, Ecolab.
3. iShares Global Water UCITS ETF (Acc)
This is the brand-new accumulating counterpart to Europe's oldest and largest Water ETF (IH2O), offering unparalleled index reliability via the S&P Global Water Index.
PHO restricts its investments exclusively to US companies. This iShares fund fixes that by tracking the S&P Global Water Index, splitting its exposure between water utilities and water equipment globally (including strong European players). BlackRock recently launched this specific Accumulating (Acc) version of their massively popular distributing fund, allowing investors to capture global water mega-trends while automatically deferring taxes on dividends through internal reinvestment.
- Ticker: CGWA (LSE)
- Total Expense Ratio (TER): 0.65%
- Structure: Accumulating (Reinvests dividends)
- Top Holdings: Xylem, American Water Works, Ecolab, Essential Utilities, Severn Trent.
4. Global X Clean Water UCITS ETF
A highly competitive expense ratio for a thematic ETF, strictly focused on global clean water infrastructure and purification technology.
Global X is well-regarded for their precise thematic ETFs. While PHO is a broad US water fund, AQWA zeroes in specifically on global clean water infrastructure, purification networks, and treatment technologies. At 0.50%, it is highly competitive on fees compared to standard European thematic ETFs. It uses an Accumulating structure, making it ideal for investors who want a high-growth thematic play without the drag of dividend withholding taxes dampening their long-term returns.
- Ticker: AQWA (LSE)
- Total Expense Ratio (TER): 0.50%
- Structure: Accumulating (Reinvests dividends)
- Top Holdings: Xylem, American Water Works, Ecolab, Tetra Tech, Pentair.
Invest in UCITS ETFs with Paasa
Paasa is a global investing platform designed for Indian investors. We provide direct access to over 10 global exchanges, including the United States, United Kingdom, Switzerland, Hong Kong, Germany, France, Canada, Netherlands, Japan, and Singapore.
This means you are not restricted to just US ETFs like PHO; you can also buy tax-efficient UCITS equivalents using Paasa.
The Compliance Advantage
Paasa makes global investing easy and also removes the compliance friction with a specialized layer built specifically for Indian residents:
- Schedule FA Reporting: Exact reports you need for your Indian tax returns, eliminating the need for manual calculations.
- Tax Filing & Advice: Access to expert tax advice and seamless filing support.
- FEMA & LRS Integration: Guidance on FEMA regulations and LRS limits to ensure compliance.
Whether you are buying direct US stocks or investing in UCITS ETFs listed on European exchanges, Paasa provides global access with India-specific compliance and tax support.
