Specialist funds dedicated to the once-vaunted BRIC quartet of emerging markets face a bleak future, as many investors have pulled out due to years of collective underperformance by the bourses of Brazil, Russia, India and China.
The sharp decline in assets is forcing managers to close BRIC funds or radically rethink their strategies for the four largest emerging economies. These include Goldman Sachs, whose then chief economist Jim O’Neill coined the acronym in 2001.
The death knell for the sector may now have sounded as Goldman’s asset management arm has rolled its BRIC fund into a broader emerging market product, telling the US Securities and Exchange Commission it did not foresee “significant asset growth” for the fund.
Assets at the nine-year-old fund had plunged to below 200m euros ($215m), according to Thomson Reuters fund information service Lipper, from around 1.2bn euros in its 2010 heyday.
O’Neill’s concept spawned a large sub-set of emerging market funds and even a development bank set up by the four countries together with South Africa. But BRIC funds’ total net assets have shrunk to just 5bn euros from the 22.4bn they boasted at the end of 2010, Lipper data shows.
The decline in fortunes has been underway for some time. Stock markets in China, Russia and Brazil, weighed down by big, inefficient state-run companies, have fared far worse than smaller emerging markets such as Indonesia and the Philippines.
Economic growth and reform have ground to a halt in Brazil and Russia, while there are doubts about China’s financial stability. Indian stocks have done well this year and last, but only after a period of poor performance, and the government is struggling to get tax and labour reforms through parliament.
“Bundling the BRICs together may have made sense in 2001 but in recent years they have all gone in different directions,” said Lena Tsymbaluk, an analyst at fund research house Morningstar. Demand from clients for rating BRIC funds had subsided in recent years, she added.
