CHICAGO (Reuters) – The worst advice on emerging markets is to go out and buy the best-performing funds or countries of last year. In most cases, the hot money has come and gone and you can’t buy yesterday’s gains. But you can invest in a wide basket of developing countries to build a more robust portfolio foundation.
That’s not to say that emerging markets aren’t worthwhile. For global investors in the past decade, it’s been accepted wisdom that investing in the BRIC countries of Brazil, Russia, India and China is the basis of a strong strategy. While that’s still somewhat true, it’s not monolithic. Russia has had its setbacks and India is slowing down. China’s economy has increasingly raised the concern of international analysts.
But what’s left? Jim O’Neill, the chairman of Goldman Sachs Asset Management who coined the BRIC acronym a decade ago, suggests expanding your horizons to include Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, the Philippines, South Korea, Turkey and Vietnam.
Global wealth seems to be moving to locales that have not been traditionally seen as bastions. While London and New York are still holding their own, high-net-worth individuals are investing in off-the-beaten track cities like Nairobi, Jakarta, Vancouver, Tel Aviv, Kiev and Cape Town. That’s according to a recent Wealth Report prepared by Knight Frank and Citi, which tracked global residential and commercial property hotspots (link.reuters.com/jav87s).
Countries that have benefited from money moving from first-tier developed nations into emerging economies include Thailand, Colombia, Indonesia, Malaysia and Singapore. According to an analysis by Lipper, a Thomson Reuters company, exchange-traded funds that invested in those countries easily trounced the BRIC strategy over the past three years through April 20.