Bric Funds

[samran]

Hi all,

I've started to look into investing a tiny bit of money into a BRIC fund. The one I'm looking at through ING here in Thailand invests about 80% into the SPDR S&P BRIC 40 ETF which particularly has a China weighting.

While I'm looking to invest for about 5 years - so anytime to invest is probably a good time - it seems to have gone down about 18% since December which potentially could be an even better opportunity to jump in now.

Does anyone have a general opinion of these type of funds?

[fletchsmile]

Samran,

I had some reservations about this fund.

One was as you mentioned on its allocation between the 4 BRIC countries, where I think it has perhaps a higher China weighting than I would chose from a BRIC fund. It was broadly just under half China, one quarter Brazil, one quarter Russia and small amount India

Secondly this China weighting reflects the fact that it is an index fund, and the countries weightings. While there's a good argument for index funds in mature markets, and short term trading, I'm less of a fan in emerging and volatile markets. In good years they can outperform but in tough periods they struggle to take the needed action. eg now are tough times in the market, I think Russia offers better opportunity, and of the 4 I'm least comfortable with China. Index funds have to live with that

Thirdly the timing of its launch was not good. It seemed to be jumping on the BRIC bandwagon and a bit late in the day. It actually put me off knowing that specialised funds and theme funds often seem to hit popularity after the good times, as fund management houses try to capitalise on recent performance. Few fund management houses seem to proactively market: "our fund has underperformed, so get in now". Instead they go with "look at the phenomenal returns so far". As someone who follows a lot of fund management houses, there is often evidence to suggest last's years star performer will not be this years.

As we know 2007 was a good year for China in particular.

That said we actually invested a small amount of money about 2 weeks back. Our reasons for doing so:

1) As you say it is down significantly since launch in a few months. Timing has proved to be poor by ING. We bought around 8.4/unit. I'm not saying there isn't worse to come, but it has already taken quite a bit of bad news.

2) We are investing longer term. Short term there are obviously risks but 5 years+ I'm confident we'll be OK

3) Since getting married, having children and returning to Thailand, I'm focusing on slowly building portfolios for my wife and daughter's future (plus hopefully another at some point ). To put in perspective our daughter is 18 months old. If I'm thinking of her education at say 18, or her future generally, it's suitable in terms of risk and reward, as a small part of their portfolios.

4) This fund offers people based in Thailand / Thai residents an opportunity to invest in a good longer term story. I believe in the BRIC and emerging markets story over the long term, as the world changes

5) I'm looking at drip feeding small continual amounts from time to time.

6) Like yourself I also hold other ING funds like Thai Equity, Good Governance etc, so overall have confidence in ING, and wanted to add something a little different for family. I believe in diversification to reduce risk. Options for Thais in investments are more limited than say in the UK, although that is changing.

These are only my views. But to summarise:

I think it has good long term potential. I wouldn't necessarily choose it if I was single living in the UK, as there are more options. But from here in Thailand it has low charges and is convenient. To add small amounts as part of a portfolio and plan a future for people based in Thailand, I think it's interesting. The recent falls make it look more like a buying opportunity than at its launch.

Edited February 15, 2008 by fletchsmile

[samran]

Fletch,

geez mate, you sound like me - that you are me!! Are you also devilishly good looking and have a Thai passport as well??

Though you took the time to articlate what you said were your personal reasons (and thanks for doing so), they are pretty much the same mine as well, and I think they are close to the reasons why you would want to invest in something like this.

China is my biggest worry, India my biggest hope, but India has a long way to go before it really takes off!! Russia I know little about, probably less than Brazil. Having said that, China has pulled back a bit, and so I'm happy that it has. But like you, I think it is a long term good story here.

My daughter is a tiny bit older than yours (21 months), and that brings with it similar thoughts on the future as you.

I did actually sign up for the fund yesterday, and put a bit of money into it, on the basis of "what the heck..it seems cheap". Following it since its launch in December, and watching it go down and flatten out at around 8.3-8.5 baht. So my question to invest is actually about investing more in it, truth be told.

While the choices here in funds are less than say the UK, or OZ, where I grew up, entry into these funds is low and relatively cheap, so it is a good deal from that perspective to put in little affordable increments.

[fletchsmile]

Samran,

Well I'm not going to disagree with you on the looks. But I do have a British passport rather than a Thai one in this life. Yes the context is important to me for investments, and we seem to have quite a few similarities as you highlight. So it's interesting to hear someone with similar thoughts. Safety in numbers?

As for investing more... it's tempting, but I'm trying to stay disciplined and build balanced portfolios in their names in Thailand, now we've finally decided to settle here for the foreseeable. I'll keep adding to it over the months, but treat it as part of building new portfolios or starting from scratch.

The other side of the coin tho' is I've had Thai only funds in Thailand for about 8 years or so, plus have portfolios outside in UK and Singapore. Overall I need to start having some consistent policies and pulling it all together, as financial planning was much easier a couple of years back when single. I'm still working all this out.

So for Thai money, in wife and kids name, we'll add patiently each month. Offshore I'll take more risks but not on this particular fund. As per the 2008 Investment thread I started, 2008 has been a tough ride so far. I did shift a little more weight to resources, metals companies, etc and they've done quite well. But we're only talking rebalancing. I also added to a Russia fund via UK (zero initial charge), which hasn't done so well. I'll add to that at some point.

Charges as you say are surprising low in Thailand.

Edited February 15, 2008 by fletchsmile

[Irene]

I will not go into BRIC or other funds of emerging market until we know of the extent of the effects of American slowdown/recession on the rest of the world. When the decoupling theory appears to be correct, then I would go in at that time. But now I still believe the theory of US having cold and the rest of the world may get pneumonia.

[Khun ?]

Look for some long/short funds that can adjust % of both at any time it deems appropriate, not the set amount of each! Alot of funds of funds that have several levels of managers that get a % before you will make a baht so be careful.

Passport Capital had a stellar year in 2007 (+200%) mainly leveraged short the subslime sector and done well in India also.

[tjo o tjim]

Personally, I think that Brazil portion of the equation holds the best prospects for intermediate to long-term growth, so the overweight China position is not too attractive for me. China, and to a lesser degree India are much more impacted by global economic factors, and Russia is so much less predictable. Brazil just seems to have so much opportunity, without all the dependencies on the RoW.