Tips & Ideas 

BRIC Stars fund "will do well"

In 2001, Goldman Sachs first coined the acronym BRIC, arguing that by 2050 the combined economies of Brazil, Russia, India and China could eclipse the combined economies of the current richest countries of the world. If you are convinced by the power of BRIC, then stockbrokers The Share Centre think that the Allianz RCM BRIC Stars fund will sit nicely in your portfolio as it's the UK's actively managed fund that specifically focuses on BRIC.

Andy Parsons, the advice team manager at The Share Centre, says: "We like the focus on those four big countries. In a broader emerging market fund you may pick up some countries that make you worried. These four countries all have unique stories. Russia and Brazil have natural resources, India has a low cost base and China is a huge super power that is waking up."

Launched in 2006, the Allianz fund returned a spectacular 58 per cent in 2007. However, this was prior to the tough market conditions of 2008, when the fund lost 54.26 per cent. The fund's volatility - for example, returning 11.23 per cent in the past month but down -15.51 per cent over six months - means it sits in the high-risk category.

Allianz Global Investors is one of the largest asset managers in the world. Its dedicated global equity firm, RCM has a team of 75 researchers and analysts, located around the globe with units across Asia and links in Russia. The fund's manager Michael Konstantinov has good credentials - he has been head of the RCM Global Emerging Markets Equities Team since 1998 and is supported by six portfolio managers on the fund. Mr Konstantinov believes solid financial systems in the BRIC economies coupled with policy measures initiated by BRIC governments will lead the BRIC markets to start performing this year.

Independent financial advisers Bestinvest, who think it is a mistake to limit yourself to just four emerging markets, point out that Allianz RCM BRIC Stars is a "Beta Bandit" fund, after Beta, a statistical term describing the degree to which a fund follows its benchmark. A fund with a Beta of 1.3 is likely to perform 30 per cent better than its benchmark in a rising market, but similarly underperform by 30 per cent when the market falls.

Allianz RCM BRIC Stars has a Beta of 1.05 per cent. So if you get the right timing, you will do spectacularly well - as investors did in 2007, or you may do spectacularly badly as investors did in 2008. However, the fund also has an Alpha of +0.31, indicating that it has performed better than expected given its beta.

If you agree with the aims of the fund and like the concept of investing in BRIC and think these markets are poised to advance then this fund can be a useful addition to a portfolio, in combination with a broader emerging markets fund or a cheap emerging markets exchange-traded fund (ETF).

The iShares BRIC 50 exchange traded fund gives passive exposure to shares of some of the largest companies in Brazil, Russia, India and China. It has a TER of 0.74 per cent and is down -59 per cent over one year. But it is slightly heavier weighted to the energy sector (35 per cent compared with 33 per cent in the Allianz fund). The Allianz fund also has much lower exposure to financials (15 per cent, compared with 33 per cent in the iShares fund).

Allianz RCM BRIC Stars A Acc
PRICE98.23pSHARPE RATIOneg
SIZE OF FUND£265.7m1 YEAR PERFORMANCE-41.44
No OF HOLDINGS643 YEAR PERFORMANCE-9.2
SET UP DATE24 Feb 065 YEAR PERFORMANCEna
MANAGER START DATE24 Feb 06TOTAL EXPENSE RATIO1.92%
 DIVIDEND YIELD3.4
VOLATILITY7.01MINIMUM INVESTMENT£500
TRACKING ERROR4.4MORE DETAILSwww.bricstars.co.uk

Source: www.ft.com/funds and Allianz Global Investors

TOP TEN HOLDINGS

Holding%
Petroleo Brasileiro8.39
Reliance Industries4.93
Compania Vale Do Rio4.52
Lukoil Oil4.41
Gazprom4.06
Infosys Technologies3.41
CNOOC2.97
Banco Itau2.79
Grasim Industries2.55
Novatek2.35

REGIONAL BREAKDOWN

Region%
Brazil27.1
Russia24.2
China20.8
India17.9
United States (Incl Cayman Islands)4.4
Luxembourg1
United Kingdom0.1

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