BRIC ETFs Languish with Emerging Markets

ETF Trends

Chairman of Goldman Sachs Asset Management Jim O’Neill, and founder of the acronym BRIC (Brazil, Russia, India, China), will be retiring. The BRIC acronym became commonplace and was the influence of a few targeted benchmarks and exchange traded funds.

However, the underperformance of emerging markets in 2013 has weighed on BRIC ETFs. [BRICs vs. Emerging Market ETFs]

“The first publicly available open-end BRIC mutual funds in the United States were not launched until the summer of 2006, when Franklin Templeton and Goldman Sachs each brought out a BRIC-focused equity offering. By the end of 2007, three index-tracking exchange-traded BRIC funds were available as well,” Greg Wolper wrote for Morningstar. [BRIC ETFs Get Hit with Outflows]

The reality of the BRIC concept hit home when the four countries, Brazil, Russia, India and China began to hold summit meetings, which now include South Africa, reports Wolper for Morningstar. The history of Goldman Sachs BRIC investment theme with ETFs is mixed, with highs and lows, the same as any investment theme is subject to. A few highlights include:

  • It made sense to compare BRIC fund performance with the broader emerging-markets offerings. Many people who chose a narrower emerging-markets fund were probably using money that would have gone to their broader emerging-markets fund, or perhaps instead of owning a broader emerging-markets fund.
  • All three exchange-traded funds that target the BRIC countries are more than five years old, so their histories can be instructive as well. Each is an index-tracker, but they follow different indexes. The ETFs have outperformed the mutual funds, relatively. [The Winners and Losers in BRIC ETFs]
  • The Guggenheim BRIC (NYSEArca:EEB) launched in September 2006 and has returned an annualized 8.3%. This is better performance than the average diversified emerging markets category. Stocks that are targeted in this index include only ADRs and GDRs.
  • The iShares MSCI BRIC Index (NYSEArca:BKF) debuted in November 2007 and has lost 4.7% since. This ETF has lagged the broad emerging markets category. SPDR S&P BRIC 40 (NYSEArca:BIK) , has beaten the category norm by less than a percentage point since its mid-2007 inception and is essentially tied with the broader Vanguard index-tracker’s returns, reports Wolper.

It is interesting to note most ETFs did not launch until almost 5 or 6 years after O’Neill’s paper in 2001 introducing the BRIC concept. This was the time period when emerging markets was going through a winning four-year rally. Today, Brazil, Russia, India and China are still important economies in the world as they have become major engines of growth and should remain so going forward. [Best Emerging Market ETFs]

Guggenheim BRIC

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BIK, EEB, BKF, Emerging Markets, BRICs, ETF

BRIC ETFs

Tisha Guerrero contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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