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BRIC Funds Trail Emerging Market Indexes

TSC Ratings provides exclusive stock, ETF and mutual fund ratings and commentary based on award-winning, proprietary tools. Its "safety first" approach to investing aims to reduce risk while seeking solid outperformance on a total return basis.

Exchange traded funds with diverse holdings in emerging markets outperformed "BRIC" investments in the three-month rally that began in March.

Three emerging market ETFs, in the table below, surged as much as 78% in the three months through May. The three best BRIC funds -- with holdings in Brazil, Russia, India and China -- posted gains of up to 70%.

The BRICs were held back by more concentrated investments. While three of the four countries performed well, a single lagging market hobbled results. Ratings

Energy and basic materials powered all six of the funds. The SPDR Emerging Europe ETF (GUR) has 50% of its assets in Eastern European energy stocks, two-thirds of which are in Russia. Top holdings include energy giants Lukoil Holdings, Gazprom and Rosneft.

Energy was a major driver in the returns of the three BRIC funds. It's the largest sector in each, making up 33% of the value of the SPDR S&P BRIC ETF (BIK), 28% of the iShares MSCI BRIC Index Fund (BKF) and 25% of Claymore/BNY BRIC ETF (EEB).

Still, the BRICs are down by more than a third over the past 12 months, as oil is at half the level of a year ago. The energy-heavy SPDR S&P Emerging Europe ETF has fallen by about 50%.

The best-performing non-leveraged ETF during the three-month rally was the Market Vector Russia ETF RSX, up 110% for the period. It was followed closely by Claymore/AlphaShares China Real Estate (TAO) and iPath MSCI India Index ETN (INP), both of which surged more than 90%.

But the fact that the best-performing Brazilian ETF, iShares MSCI Brazil (EWZ), was far down the list with an advance of 61% shows that one underperformer can put a drag on returns.
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GUR $25.65 1.20%
BIK $18.21 0.33%
BKF $29.26 0.22%
TAO $18.85 0.05%
RSX $16.91 1.50%


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