HEAD-TO-HEAD: Allianz versus Pictet

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Investment process

Both the Allianz and Pictet funds are very similar, given that the universe of water companies globally is relatively small, according to McDermott.

For example, the Allianz fund’s investable universe is just around 150 companies, according to data from Morningstar Direct.

McDermott said that the firm only invests in “water-related companies”, which are those that are engaged in water production and transportation, as well as those that are engaged in water demand-reducing technologies and purification.

The Pictet fund’s investment universe is slightly wider – at around 360 water companies globally, according to McDermott. The product takes into consideration the strength of the business franchise, its ESG focus and the quality of management as well as valuation prospects.

“It also tries to have a barbell strategy of a defensive core of utilities and more economically sensitive companies.”

Both products also apply ESG screens, McDermott added.

Given that there are a limited number of stocks in which either of these funds can invest into, both products have very similar sector exposure and individual holdings.

For example, both have American Workers, Xylem and Danaher as their top three holdings, McDermott said.

However, the main difference is how concentrated each fund is. Allianz is very concentrated with just 30-35 stocks, while the Pictet fund invests in around 55 names.

“The higher conviction in the Allianz Global Water Fund is reflected by the top three holdings accounting for around 24% of its portfolio, compared to the 14% for the Pictet offering,” McDermott said.

He added that the top seven holdings of the Allianz fund make up around 46% of its portfolio, compared to just 28% in the Pictet product.

Top 10 holdings

Source: Morningstar

Sector allocation (%)

Source: Morningstar

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