beyondbrics

Today beyondbrics is launching a new feature called Fund File that will offer views on emerging markets from the fund management industry. It will draw on content from FTfm, the Financial Times’ weekly review of fund management, and will appear here on Monday mornings. Here’s the first post:

Investment funds looking to diversify are increasingly lured by the charms of emerging markets, but as FTfm’s Steve Johnson notes this week, the race is on to come up with a grouping that will deliver the success of the Bric quartet.

Edging ahead, according to Johnson, is the Next 11, a term coined by Jim O’Neill, the former Goldman Sachs chief economist who just last Friday became head of its asset management division, and the man who also came up with the Bric idea.

The Next 11 (South Korea, Mexico, Indonesia, Turkey, the Philippines, Egypt, Vietnam, Pakistan, Nigeria, Bangladesh and Iran) will be the basis of a fund to be launched in the next few months by London-based Castlestone Management.

BNP Paribas’s Easy ETF arm does offer a Paris-listed Next 11 exchange traded fund but, for liquidity reasons, this only invests in eight of the markets.

Perhaps there could be problems with the Next 11. O’Neill himself freely admits there was ‘no great science’ behind the creation of the Next 11 contenders. They were simply the most populous emerging market nations after the Brics.

“It was never intended to be anything like the Bric thing. I regarded the Brics as four integral parts of the world economy. I wouldn’t say the same about all the Next 11 countries,” O’Neill says in his defence.

So, perhaps the rival Civets might win hearts: Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa are a grouping of opportunity identified by HSBC’s Michael Geoghegan. His bank may now capitalise with a first Civets fund, although it may be tagged “Civets Plus”, apparently, to offer wider diversification. So Civets isn’t quite good enough either?

One man who is fed up with these artificial constructs is Jerome Booth of Ashmore Investment Management, who has fought back by inventing a term of his own in the form of Cement: Countries in Emerging Markets Excluded by New Terminology.

I have never understood why anybody should just invest in 11 countries or four countries. It has never made any sense to me. People should diversify.

So it looks like fund managers are going to have to keep looking for the Next Bric Thing.