Mike Avery, chief investment officer of Waddell & Reed, said a third of the world's population lives in the BRIC group and has become the focus of the Ivy and Waddell & Reed Asset Strategy funds he helps manage.
"Within the equity exposure in the funds, it is all focused on the BRIC countries in some way, either due to infrastructure, materials, energy, industrials, or in areas that the emerging middle class will spend money on," Avery said.
And they are eager to do so. Avery said he found a two-month waiting list for car buyers during his visit to China last month.
The BRIC markets gain favor also because their economies emerged from the financial meltdown in much better shape than Western economies, said Patricia Ribeiro, a portfolio manager for the American Century Emerging Markets Fund.
Banks in Brazil and India, for example, avoided the toxic assets that brought down large U.S. and European institutions. Consumers didn't become overly burdened by debt.
Ribeiro also said the BRIC governments have generally been more disciplined with fiscal and monetary policies than in the past. China's economic stimulus package gets high marks, and India's voters gave government reform a ballot-box endorsement.
"When you think of prior crises we have had ... all of them had a real hard time," Ribeiro said.
"If you look at the BRIC countries this time around and in the context of the global crisis still happening, what you're seeing is that these countries are in a very, very good position."
Financial planner Stewart Koesten echoes her reading.
"These countries are not like they used to be," said Koesten, president of KHC Wealth Management in Overland Park. "Their economies are real economies."
Setting limits
It's one thing to like the BRIC outlook and quite another to invest in it. Experts temper their enthusiasm with caution.
Stocks in emerging markets are riskier than their Western counterparts.
Their prices are more volatile. One reason BRIC markets have bounced higher than U.S. stocks is because they fell further in the crisis.
Currency differences add another twist to overseas investing.
And there are political risks.
"Russia, we wouldn't touch with a 10-foot pole," said James Moffett, manager of the Scout International Fund.
"You don't have any idea what the government will do."
Moffett, frequently among the top performing international fund managers, also avoids direct investment in Chinese companies. He owns no shares of China National Offshore Oil Corp, commonly called CNOOC, or shares of China Petroleum & Chemical Corp., known widely as Sinopec. He said it amounted to holding part interest in a government entity.
But similar to other fund managers, Moffett likes indirect plays on China's growth, such as in Taiwan, Korea and Singapore markets. These emerging markets haven't attained the same growth stature as the BRIC quartet, but Moffett likes their corporate governance protections.
Koesten said emerging markets are part of the world's capital base and should be part of an investor's plans, just as U.S. and developed international markets would be.
The task is to keep them in proper proportion.
Schreft cautions against becoming overexposed.
She recommends that investors look for funds that tap other emerging markets to balance the BRIC exposure investors likely already have.
"You have to be cautious. You probably have more than you think," Schreft said.
To reach Mark Davis, call 816-234-4372 or send e-mail to mdavis@kcstar.com.
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