BRICing it

As much of the world’s focus currently remains on the Western world and its economic problems, what has happened to the BRIC economies that have been relied upon to power the recovery?

Funds investing in the BRIC (Brazil, Russia, India and China) group have performed over the longer-term, taking advantage of growth in the rapidly expanding economies, but have faltered more recently.

Big falls have been experienced by BRIC funds this year, while star fund managers such as Anthony Bolton and Mark Mobius have been questioned over their investment decsions in the countries.

Tom Biggar, head of investments at TQ Invest, says the BRIC countries have “traditionally” been more volatile than the West, but had recently entered a period of underperformance.

He says the stocks are falling into line with developed markets as they move away from their emerging market status and become more mature, becoming more aligned with western markets. (FundTalk continues below)

“BRICs are becoming more geared to developed markets mainly due to their commodity exports,” he explains. “Some of their mega and large cap stocks are gaining parity with western counterparts and becoming more popular as an investment opportunity.”

Another reason for underperformance, he points out, is inflation and eurozone contagion, which have had a greater impact than on other emerging market economies.

So are BRIC funds worth taking a look at? Western economies will still struggle to get on top of sovereign debt, while further stimulus could be needed to jump start spending.

PricewaterhouseCoopers estimates that BRIC countries will represent 40% of world GDP growth during 2011 and 2012, a greater proportion expected to come from G7 countries.

It seems if you are prepared to weather short-term volatility there are long-term rewards.