These days it seems a lot of investors are focused on the developing nations including the BRIC economies - that’s Brazil, Russia, India and China. So called BRIC ETF's are becoming more and more popular investments because they’ve seen eye-popping returns of late. What does the fast money crowd know that you don't? CNBC asked Tim Strazzini of our own "Fast Money" show--who is also Managing Director at Pali Capital. "Fast Money" host, Dylan Ratigan also joined in.
In case you’re wondering--the term BRIC was coined by Goldman-Sachs in 2003 – in a report which suggested Brazil, Russia, India and China (BRIC) could, one day, rival the economies of Japan and the United States. By 2050 these countries are forecast to encompass over 40% of the world's population and hold a combined GDP of $14.951 trillion dollars
Nowadays BRIC’s have become a more generic term to refer to emerging markets. BRIC ETF’s (electronically traded funds) are becoming popular alternatives to traditional mutual funds. “They’re really, in my mind, more transparent, more liquid, and a fairer priced replacement,” explained Tim Strazzini. “I don’t think they will completely replace the mutual fund business, but that’s where they’re stealing business from.”
The risk seems to begin with investors who don’t understand the investment. “It’s a narrowly focused basket of stocks,” added Strazzini.
“With a lot of these BRIC funds,” said Dylan Ratigan, “What you tend to own a lot of, are the banks...telecom and industrials, the things that are at the base of the economy.” (In other words if you own a Brazil fund you really own a lot of Brazilian telephone companies, banks, and energy assets.)
For people who are interested in this kind of investment, Strazzini has some perspective. “I think they’re a terrific tool but they have to be added to a portfolio in the right way."
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