Which investment takes your fancy: BRIC, MINT or CIVETS? For many fund managers seeking the next big thing in emerging markets, the answer is none.
Acronym investment — putting money into small groupings of markets which often have little in common beyond a broad economic concept — is giving way to acronym anxiety.
Former Goldman Sachs economist Jim O'Neill set the ball rolling in 2001 when he created the BRIC family of Brazil, Russia, India and China.
Many of these countries and others lumped together under separate acronyms have, at least until recently, enjoyed turbo-charged economic growth. But investment gains are not guaranteed and underperforming local stock markets have led fund managers to flee what had been fashionable
Assets under management in BRIC funds fell to 9 billion euros at the end of last year from 21 billion at the end of 2010, according to Lipper data, while assets under management in broader emerging equity funds have grown in that time.
Goldman Sachs's own BRIC fund has lost 20% in value over the past three years.
Undaunted, O'Neill has coined a new acronym. In a series on BBC radio this month, he championed the MINT group — Mexico, Indonesia, Nigeria, Turkey — as the next giants after the BRICs. O'Neill stresses that MINT — like BRIC before — is an economic, not an investment, concept and his programmes explored each country's problems as well as its potential.
Nevertheless, the appeal of acronym investment is fading. Fund managers say such groupings do not take into account different stages of development of the countries involved and risk sidelining other promising markets. The groupings have also frequently suffered from disappointing performances of their listed companies, the main target of foreign investors.
O'Neill's timing is not ideal. Turkey has been rocked by an investigation into alleged corruption following street protests last summer, while Nigerian politics are in turmoil before elections next year.
Indonesia, along with other emerging economies which are running large current account deficits, is experiencing a flight of investors.
“Mexico, Indonesia, Nigeria and Turkey are all very interesting countries but not much connected beyond the excuse for having an acronym,” said Richard Titherington, chief investment officer of emerging equities at JP Morgan Asset Management. Titherington prefers groupings by concepts such as markets where companies offer the highest dividend yields.
Investors in the BRIC countries have already found out the hard way that economic growth may not convert into stock market gains, and