There is an acronym for almost everything – one of them is BRIC – Brazil, Russia, India, and China. It was a term coined by a British economist at Goldman Sachs, Jim O’Neill back in 2001 referring to these economies and the state of economic development.
Let’s briefly look them BRC-I style.
B - Brazil is a vast landmass with abundant natural resources and a growing technology sector. It is amongst the largest producers of beef, pork chicken, and eggs. A former Portugal claim, the country next year will have the 200-year anniversary of independence. In the years following independence the country has been in multiple terms of political and military turmoil settling into the current elected government only 35 years ago.
R - Russia while the largest country by size and one of the largest by population has several major problems including military interventions, treatment of its own citizens and lack of a free press. The country is heavily dependent on oil and gas as well as mining. While not officially a superpower anymore, Russia more than 6,000 nuclear weapons. Good times.
There is no easy way to invest in either Russia or Brazil, even if you could make the case.
C – China, as Australia’s largest trading partner, we likely both familiar with and have an opinion, so I’ll park this one.
I - We are left with the not without its own problems, including the country with the largest percentage of the population below the poverty line, India.
As with many emerging markets, corruption is a problem. The way I see it there are two type of corruption – greed and position. While there are both in India, the expression chai paani, or translated, a little bit extra, is pervasive.
Greed has also played a part. Founder and in 2009 chairman of Satyam performed accounting wizardry that manipulated accounts Enron style – to the tune of USD3B.
This is changing, with the Lokpal bill which unbelievably came following a political hunger strike, creation of an ombudsman and the movement of many government services to computer-based systems.
The country has built some incredible service organisations, especially in technology. Half of the world’s top 15 tech companies are in India. Companies including Wipro, Tata, Tech Mahindra, and Infosys are talking advantage of the increasingly educated and largely fluent English speaking tech community. My personal experience with tech offshoring has been in Chile, Malaysia, The Philippines, Poland, and India. While the choice a few years ago may not have been, my first choice now would be India.
As an outsider, until recently it has been impossible to invest in India, unless it was via dual listed companies such as Wipro.
The magic of ETF’s has now delivered us two options, IIND and NDIA but what is under the covers, and which may suit your needs.
These thematic ETF's are great if you want to buy into a trend. Let's look at the two currently available for India:
IIND from Betashares “the 30 highest quality Indian companies based on a combined ranking of the following key factors – high profitability, low leverage and high earnings stability.” For the favour it takes a 0.8% management fee annually.
This unhedged ETF is backing the Indian economy with approximately 75% of the holdings evenly split across in Financials, Consumer Staples, and Infotech. It is benchmarked against the Solactive India Quality Select Index which it has lagged since inception in late 2019.
NDIA is allternative #2 this time from ETF Securities, it is also unhedged. The ETF “offers exposure to the emerging Indian economy through its premier benchmark, the NSE Nifty50 Index.”. This team does us a favour with a marginally lower management fee of 0.69% per annum.
The allocation is different with 40% financials, 15% Infotech and somewhere near 10% energy. This is a very different mix, especially the financials weighting. NDIA tracks the index, well, ‘cause it is an index fund.
Despite IIND having a slightly higher management fee, and lagging its benchmark, this would be my choice between the two.
