Reuters. Funds specialized dedicated to the once acclaimed quartet of countries known emerging markets such as BRIC face a bleak future, as many investors have abandoned after years of poor collective performance on exchanges of Brazil, Russia, India and China.
The sharp decline of assets is forcing administrators to close BRIC funds or radically rethink their strategies for the four largest emerging economies. These include Goldman Sachs, the then chief economist Jim O'Neill coined the acronym in 2001.
Now the death sentence for the sector could have been sealed since the asset management arm of Goldman turned his back on a BRIC product broader emerging markets, explaining to the SEC in the United States does not see a "significant asset growth" for the background. The value of the assets in the fund collapsed nine years less than 200 million euros (215 million dollars), according to Lipper, the fund information service of Thomson Reuters, up from about 1,200 million euros in its heyday in 2010.
The concept of O Neill gave rise to a large subset of emerging market funds and even a development bank created by the four countries along with South Africa. However, the total net assets of the BRIC funds have been reduced to only 5,000 million euros, compared with 22,400 million euros at end-2010, according to Lipper. The decline has been ongoing for some time. Stock markets in China, Russia and Brazil, pressured by large and inefficient state enterprises have had a lot worse than the smaller emerging markets such as Indonesia and the Philippines performance.
Economic growth and reforms have stalled in Brazil and Russia, while there are doubts about the financial stability of China. India shares have performed well this year and last, but only after a period of poor performance, and the government struggles to get approval of tax and labor reforms in parliament. "Joining the BRIC may have made sense in 2001, but in recent years have taken different directions," said Lena Tsymbaluk analyst research firm Morningstar funds.
BRIC funds followed by EPFR Global, based in Boston, have suffered net outflows every year since 2011. This year they have lost 1,400 million, after the 2,000 million who lost last year, according to EPFR Global. Lipper data show that 92 funds BRIC remain active, eight fewer than in 2013. Even the BRIC fund managers are cautious. Kunal Ghosh, who manages the fund Allianz BRIC says that not rule merge with a larger pop background in the future if customers demand it. "If you become dogmatic about consecrate acronym and 100 percent of your assets in BRIC, get low profitability," said Ghosh, who believes that emerging markets as a group will not perform well unless its four major components to rebound .