BRIC Bond

BRIC bond mutual funds and ETFs invest the majority of their assets... BRIC bond mutual funds and ETFs invest the majority of their assets in various bonds issued by governments and corporations in the so-called BRIC economies: Brazil, Russia, India, and China. This term was coined by Goldman Sachs economist Jim O’Neill in the early 2000s to describe the four largest emerging market economies, which he argued had much in common (although other economists believe there are significant differences among the nations’ economies). China and India both have populations of over a billion people, and have exhibited very high levels of growth in recent decades. Brazil has also had strong growth, but has experienced more economic volatility lately, with GDP contracting. In the case of Russia and Brazil, both economies are heavily reliant on commodity prices and production. These funds can be actively or passively managed and may seek to track or outperform a particular benchmark. They may hedge foreign currency risk, or elect to leave themselves exposed to fluctuations in other nations’ currencies. Depending on their mandate, these funds may focus on investment-grade bonds, high-yield (a.k.a. junk bonds), or a mix of credit quality. Total government debt in BRIC economies reached over US$19 trillion in 2023, of which China accounted for nearly US$14 trillion. Investors typically purchase these funds in order to achieve a mix of capital growth and income for their portfolios. Another reason investors buy these funds is that they typically can earn a spread over the yields available in developed markets. These funds usually only appeal to investors with a high risk tolerance. There can be an additional case of geopolitical risks associated with some of the BRIC nations. For instance, due to the invasion of Ukraine, some funds may not purchase any more Russian debt, and they may not be able to cash out of debt previously purchased. There are also fears about how the Chinese government will treat foreign bondholders vs. domestic bondholders. Like all fixed-income investments, these funds can come with duration risk, which is the potential that rising interest rates reduce the value of bonds in a portfolio. On the flip side, falling interest rates can lead to a rise in the price of bonds. Last Updated: 04/19/2024 View more View less

BRIC bond mutual funds and ETFs invest the majority of their assets in various bonds issued by governments and corporations in the so-called BRIC economies: Brazil, Russia, India, and China. This term was... BRIC bond mutual funds and ETFs invest the majority of their assets in various bonds issued by governments and corporations in the so-called BRIC economies: Brazil, Russia, India, and China. This term was coined by Goldman Sachs economist Jim O’Neill in the early 2000s to describe the four largest emerging market economies, which he argued had much in common (although other economists believe there are significant differences among the nations’ economies). China and India both have populations of over a billion people, and have exhibited very high levels of growth in recent decades. Brazil has also had strong growth, but has experienced more economic volatility lately, with GDP contracting. In the case of Russia and Brazil, both economies are heavily reliant on commodity prices and production. These funds can be actively or passively managed and may seek to track or outperform a particular benchmark. They may hedge foreign currency risk, or elect to leave themselves exposed to fluctuations in other nations’ currencies. Depending on their mandate, these funds may focus on investment-grade bonds, high-yield (a.k.a. junk bonds), or a mix of credit quality. Total government debt in BRIC economies reached over US$19 trillion in 2023, of which China accounted for nearly US$14 trillion. Investors typically purchase these funds in order to achieve a mix of capital growth and income for their portfolios. Another reason investors buy these funds is that they typically can earn a spread over the yields available in developed markets. These funds usually only appeal to investors with a high risk tolerance. There can be an additional case of geopolitical risks associated with some of the BRIC nations. For instance, due to the invasion of Ukraine, some funds may not purchase any more Russian debt, and they may not be able to cash out of debt previously purchased. There are also fears about how the Chinese government will treat foreign bondholders vs. domestic bondholders. Like all fixed-income investments, these funds can come with duration risk, which is the potential that rising interest rates reduce the value of bonds in a portfolio. On the flip side, falling interest rates can lead to a rise in the price of bonds. Last Updated: 04/19/2024 View more View less