Tags: BRIC | funds | luster | closing

NYT: BRIC Markets Are Losing Their Luster

Monday, 08 Oct 2012 08:07 AM

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Stock markets in Brazil, Russia, India and China, collectively known as the BRIC economies, aren’t so rock-solid these days.

The iShares MSCI BRIC Index exchange-traded fund (ETF) lost an annualized 2.45 percent over a three-year period ended in September, while the iShares MSCI’s broader emerging-markets index gained 3.13 percent during that same time, The New York Times reported.

Other studies paint a similar picture.

Editor's Note: I Wish I Were Wrong — Economist Laments Being Right. See Interview.

The Class A shares of Goldman Sachs’s BRIC fund lost an annualized 0.73 percent during that the same period, while those of a Templeton BRIC fund lost 0.67 percent, according to Morningstar data cited by The Times.

Money continues to flow out of funds that focus on companies in BRIC countries, separate data show, and experts point out that investors looking at emerging markets need to diversify.

“The BRICs represent 44 percent of the MSCI emerging-market index,” said John Chisholm, chief investment officer at Acadian Asset Management in Boston, The Times added.

“That’s a big percentage. But if you were investing in the U.S., you wouldn’t limit yourself to only the four biggest sectors. That wouldn’t make sense. Similarly, it doesn’t make sense to limit your universe among the emerging countries. There’s never really an investment rationale for limiting yourself like that.”

Other investors point out that while BRIC economies have boomed in recent years, companies in those countries haven’t necessarily followed suit.

“We don’t think of BRICs as an entity. Our strategy is to see which companies we like and we own those companies,” said Jeff Chowdhry, a fund manager at F&C Investments, according to Reuters.

“BRIC is an investment fad that’s had its day. What you will see is more and more of these funds quietly closing down.”

Other experts agree that economic growth doesn’t always send stock indices booming in tandem.

“There were a lot of opportunistic fund launches based on the false premise that you could separate the BRIC markets from others because of their supposed [gross domestic product] potential and size,” said John-Paul Smith, head of emerging equities at Deutsche Bank, Reuters added.

Editor's Note: I Wish I Were Wrong — Economist Laments Being Right. See Interview.

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