Catching Up With The BRIC ETFs (BKF, BIK, EEB)

The once-popular BRIC countries have soured over the last couple of years as performance has lacked peers.

The acronym that stands for Brazil, Russia, India and China was a widely successful investment strategy throughout the first decade of the 21^st century.

As of late the performance has suffered for numerous reasons, however in the last week a renewed focus on India has investors once again looking at the group of countries. The world’s largest election ended last week with a new ruling party in India that many view as pro-business.

The outcome resulted in the Indian stock market hitting a fresh all-time high and helping the BRIC ETFs rally.

While the Indian stock market has turned around, the other three countries are dealing with issues that are holding back their respective economies. The problems in Russia are front and center as they continue to wreak havoc in the Ukraine.

Even with Russian equities trading at low single-digit valuations, investors are hesitant to invest in the country due to abnormally high geopolitical risk.

China has been dealing with a slowing economy as investors continue to debate whether the final outcome will be a hard or soft landing. Recent numbers showed the Chinese housing market slowing to the worst level in years.

See also: Indian ETFs Rally On Election Victory

The Shanghai Index remains well below the 2007 high and has been in a steady downtrend since 2009. In Brazil, the country should be preparing to host the World Cup next month, instead they are scrambling to finish venues and projects that should have been completed years ago. The economy has been sputtering and the stock market is also in the midst of a five-year bear market.

BRIC ETFs

The largest is the iShares MSCI BRIC Index ETF BKF with $399 million in assets under management. The ETF is made up of 306 stocks with China making up 41 percent, Brazil 27 percent, India 17 percent and Russia 12 percent.

Half of the portfolio is investing in the financial and energy sectors. Over the last 12 months the ETF is down five percent and is unchanged in 2014. The annual expense ratio is 0.67 percent.

The Guggenheim BRIC ETF EEB has $173 million in assets and is composed of a basket of 119 stocks. Brazil is the most heavily weighted, followed by Russia at 25 percent, China at 20 percent and India at 12 percent.

Energy and financials make up 49 percent with an expense ratio of 0.64 percent. Over the last 12 months the ETF is down two percent and year-to-date it has lost one percent.

The SPDR BRIC 40 ETF BIK is a basket of only 40 stocks with $157 million in assets under management. China makes up 53 percent of the portfolio, Russia at 20 percent, Brazil at 19 percent and India at eight percent. The financials and energy make up 64 percent of the portfolio and the expense ratio is 0.50 percent.

Over the last 12 months the ETF is down two percent and it is down three percent in 2014.

Even though the makeup of each ETF varies dramatically the performance has been fairly consistent over the last 12 months. Going forward India appears to be the best bet, suggesting that BKF could be set up to outperform in that scenario.

Other analysts believe Russia is an attractive long-term investment at current levels, which would be bullish for EEB.