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Era Of BRICS Investing Is Officially Over At Goldman Sachs

The asset management business Goldman Sachs has ended its BRIC fund, stating that it would “not experience significant asset growth in the foreseeable future.”  The company was the first investment firm to champion investing in the BRIC nations – Brazil, Russia, India and China.

The acronym was created in 2001 by Goldman Sachs’ then-chairman Jim O’Neill and it brought attention to the growing economic potential for these emerging markets. It was later expanded to BRICS to include South America. The name created the idea that these countries should be seen as a linked economic force that represents the rise in emerging markets outside of the United States. It lead to billions of dollars in investment decisions by consumer companies as well as the creation of financial institutions.

Jorge Mariscal, the chief investment officer of emerging markets at UBS Wealth Management, which oversees about $1 trillion, did not seem surprised to hear of the end of BRIC.

The promise of BRIC’s rapid and sustainable growth has been challenged very much for the last five years or so. The BRIC concept was popular. But nothing is eternal.

Created in June 2006, Goldman’s BRIC fund experienced swings during the financial crisis in 2008 and 2009. According to an official filing, it averaged only a 3 percent average annual return. In September, Goldman warned that it would end its BRIC investments and turn it into a more diversified emerging market fund in October.

Goldman Sachs has stated that, although the BRIC era is over, it is not the time to give up on emerging markets. Andrew Williams, a spokesman for Goldman Sachs, was clear about this.

“Over the last decade emerging market investing has evolved from being tactical and opportunistic to being a strategic part of most asset allocations. We continue to recommend that our clients have exposure to emerging markets across asset classes as part of their strategic asset allocation.”

A report in October from the Center for Strategic and International Studies argued whether or not the BRICS were still important, stating that “the foundation of the BRICS concept is beginning to crumble.”

Investors and the rest of the world, including the leaders of the BRICS nations, have realized that combining large, dissimilar nations at different stages of industrialization and development is not a good formula for guaranteed or fast returns.

“Conflicting interests and the indisputable political, social, and cultural differences among the group’s members have kept the BRICS from translating their economic force into collective political power on the global stage,” the Center for Strategic and International Studies report said. “And with economic prospects decreasingly promising, the notion of the BRICS as a political project seems too fragile to stand on its own.”

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