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 holdings exceed $60,000, your estate faces US estate tax at progressive rates of up to 40% on your death. On a $500,000 holding, that works out to roughly 29% of the portfolio.
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 Filtered Index, these alternatives capture the same water theme with better geographic diversification without the risk of the US Estate Tax.
Table of contents
- Why Indians are looking for UCITS alternatives to PHO
- Popular UCITS alternatives for PHO
- Invest in UCITS ETFs with Paasa
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 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 defers your Indian tax liability until you sell the fund, and converts what would have been slab-rate dividend income into capital gains.
To learn more about UCITS ETFs and why Indian investors are choosing them, read our guide on UCITS ETFs.
Popular UCITS alternatives for PHO
PHO tracks the NASDAQ OMX US Water Index with a modified liquidity-weighting methodology. Here are the top four accumulating UCITS funds that serve as the best proxies for PHO, all of which take a global rather than US-only approach.
1. L&G Clean Water UCITS ETF
While PHO is 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 reinvests dividends, so there are no taxable payouts until you sell.
- Ticker: GLUG (LSE, USD)
- 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 UCITS ETF Acc
Originally a Lyxor fund and now run by Amundi, this is a long-standing water strategy in Europe. Unlike PHO, which tracks a NASDAQ US index, it tracks the MSCI ACWI IMI Water Filtered Index, a global water index that applies screening filters to its constituents.
This share class is accumulating, so all payouts are reinvested. Note that the fund is domiciled in France rather than Ireland, which still keeps it outside US estate tax.
- Ticker: WATC (LSE, USD)
- 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 accumulating share class of iShares' long-running Global Water fund, whose distributing class trades in London as IH2O. PHO is limited to US companies, while this fund tracks the S&P Global Water Index and splits its exposure between water utilities and water equipment makers worldwide, including European companies.
The accumulating class launched in 2021 and is listed on Euronext Amsterdam rather than the LSE, so it trades in EUR.
- Ticker: H2OA (Euronext Amsterdam, EUR)
- 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
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 is accumulating, so dividends are reinvested and your Indian tax is deferred until you sell.
- Ticker: AQWA (LSE, USD)
- Total Expense Ratio (TER): 0.50%
- Structure: Accumulating (Reinvests dividends)
- Top Holdings: Xylem, American Water Works, Ecolab, Tetra Tech, Pentair.
More UCITS alternatives: UCITS alternatives to MOO and UCITS alternatives to ICLN.
Related: What are UCITS ETFs? and Should you switch from US ETFs to UCITS?
Invest in UCITS ETFs with Paasa
Paasa is a global investing platform designed for Indian residents and NRIs. We provide direct access to 11 markets: the US, Canada, the UK, Germany, France, Switzerland, the Netherlands, South Korea, Japan, Hong Kong 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 for Indian residents and NRIs:
- Schedule FA reporting: Exact reports you need for your Indian tax returns, eliminating the need for manual calculations.
- FEMA & LRS guidance: 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.
