The Brics bubble has officially burst. Fourteen years after then Goldman Sachs economist Jim O’Neill coined the acronym for Brazil, Russia, India and China (South Africa was added later), Goldman is merging its Brics fund with a broader emerging-market fund. The fund has lost 88% of assets since 2010; its value is down by more than 20%.
O’Neill’s coining of the Brics term, to “jazz up otherwise turgid” research, “did wonders for his employer’s revenues and his own pay”, notes News.AsiaOne.com. And it didn’t just stimulate interest in emerging markets – it also caught the mood in academia, symbolising a world no longer dominated by Europe and the US.
It’s also a great illustration of why you should be wary of all things fashionable when investing. Brics may have been a catchy acronym, says James Moore in The Independent, but the four countries had little in common beyond being large emerging markets at similar stages of development.
In reality, each has been vulnerable to several different problems, from the commodities slump and over-investment, to corruption and political instability. But “it’s probably too much to hope that the Bric backers will have learned their lesson from this”. Get set for more catchy but pointless acronyms.