Why there has never been a better time to buy the BRICs
Rather than becoming concerned by the countries’ poor performance of the past few years, many industry experts say it has created the perfect buying opportunity.
The BRIC countries still have the greatest potential out of all the emerging markets, despite the poor press they have recently received, according to industry experts.
Brazil, Russia, India and China have performed relatively poorly of late, leaving many wondering whether the previous positivity surrounding them was over-hyped.
However, Tony Yousefian (pictured)
, who heads up the multi-manager EFA OPM Worldwide Opportunities
fund, has recently upped his exposure to the countries as he believes they will soon experience a surge and he wants to take advantage of low valuations.
For example, he recently purchased the iShares FTSE China 25
exchange traded fund (ETF) and Allianz RCM Brazil
"So far in 2012 this has cost us in performance, but we do feel that our view will be vindicated going forward from here on," he said.
Data from FE Analytics
shows that only the MSCI Russia index has made money in the past two years, returning 5.29 per cent while the MSCI India index lost 22.65 per cent.
Performance of indices over 2yrs
Source: FE Analytics
Darius McDermott, managing director at Chelsea Financial, says that BRIC countries still offer strong growth opportunities and that their recent poor performance simply makes this the perfect opportunity to buy.
"What we have seen is that BRIC stock market valuations are very cheap at the moment and there is certainly good potential there."
"There has certainly been a great deal of interest in BRIC markets over the past few years; that is why we have added Allianz BRIC Stars
to our investment portfolio."
Opinions differ on whether it is better to hold single-country emerging market funds or a broader BRIC product. Critics say that the disparate nature of the four economies makes it illogical to hold them together, but McDermott disagrees.
"I think if you package the BRIC funds together they certainly do have relevance," he said. "This is shown by China’s manufacturing capabilities, Brazil and Russia’s resources and, whilst India does have infrastructure issues, it has a young and dynamic population."
Kerry Nelson, managing director at Nexus Independent Financial Advisers, said: "We do recommend BRIC funds, but only in moderation as we think investors should have a more consolidated approach to their investments."
"Instead of focusing on funds specific to individual BRIC countries, we go for a wider perspective. This gives you a more diversified portfolio with access to all markets."
"I go for both BRIC funds and general emerging markets funds because they do behave very differently. However, funds that have holdings across all emerging markets don’t tend to have huge amounts of exposure to individual countries, which can lead to a very diluted portfolio."
"A major reason why we like BRIC funds is because you cannot ignore those markets from the point of view of future global growth; this is because they will continue to strengthen in the future due to their demographics and resources."
The IFA says she does have some reservations with the countries, which is why she only invests in them in moderation.
"Our moderate stance on BRICs is because there is still a lot of work to be done there, certainly in terms of their political dynamics," she finished.