Indices and ETFs targeting BRIC countries

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The growth prospects of BRIC countries (Brazil, Russia, India, and China) have caught the attention of investors, who are now able to gain exposure to stocks in these markets via a range of passive indices.

BRICs was a concept first coined in 2001 by former Goldman Sachs Asset Management chairman Jim O’Neill, and these countries have since established a quasi-formal political bloc in an effort to take advantage of opportunities for mutual trade and investment.

The BRIC economies are expected to grow faster than their developed-market counterparts over coming decades, partly thanks to growing manufacturing and raw materials sectors.

Now, several index providers offer products that give exposure to companies in these markets. While the BRIC bloc has been expanded to also include South Africa (hence the new term ‘BRICs’), stocks from this market are not usually included in indices as the South African economy is far smaller than those of ‘the big four’.

BRIC ETFs on the market include the iShares MSCI BRIC ETF, the SPDR S&P BRIC 40 ETF, the Claymore/BNY Mellon BRIC ETF, the Rydex Russell BRIC Equal Weight ETF, and the Guggenheim BRIC ETF.

Some of these are smart beta strategies, including the Rydex Russell BRIC Equal Weight ETF, which tracks an index that applies equal weightings to its constituents, rather than the traditional market cap-weighting approach.
Smart beta strategies seek to produce superior risk-adjusted returns by using alternative index construction methods.

Meanwhile, other index providers offer exposure to stocks in non-BRIC emerging markets. The Columbia Beyond BRICs ETF, for instance, tracks the FTSE Beyond BRICs Index. At the end of September, South African stocks had the highest weighting in this index.