Fifteen years ago when then Goldman Sachs Asset Management head Jim O’Neill coined the term ‘Bric,’ little did he know that he was starting a trend and redefining the emerging markets world. What followed was a barrage of similar acronyms created by market analysts to group various emerging countries together. Investors looking for higher yields could venture into ‘acronym investing’.
While some emerging markets continue to offer good returns, the concept of grouping them under various acronyms may not work. Lack of flexibility and changes in their situations over a period of time have led investors to look instead at single-country funds. Most fund managers prefer to launch these single-country focused funds where they can understand the markets well and take calculated risks.
The original Bric (Brazil, Russia, India and China) countries continue to influence UK economics although events such as the slowdown of the Chinese economy and high levels of debt in emerging countries are a risk for many economies. Mr O’Neill, now a lord and commercial secretary to the Treasury says the state visit of the Chinese president, Xi Jinping, has brought the two countries together.
“As exhibited by the moods around president Xi’s visit, we are trying to deepen our bilateral economic ties,” Lord O’Neill says. “We recognise, notwithstanding China’s cyclical economic changes, the rising importance of China economically in the world. If we want to rebalance our economy and become more successful at exporting, we have to be more successful in the most important places. Having a more successful exchange of foreign direct investment in both directions is a key driver.”
The UK is also deepening ties with other emerging nations such as Brazil and India, he says.
However, 15 years on, from the acronym Bric’s first appearance, there is a common view that grouping emerging countries together doesn’t always work. “I have never invested in acronym investments in the past, and I never will in the future,” says David Coombs, head of multi-asset funds at Rathbones. “I have always thought Bric was a marketing acronym rather than an asset class or investment strategy. Randomly putting four countries together which have completely different drivers to their economies made absolutely no sense, and so I’ve never bought a Bric fund in my career.”
