Goldman Sachs has dropped its BRICS investment fund in favour of a general emerging markets fund. The five countries that composed the BRICS label – Brazil, Russia, India, China and South Africa – were once coveted as the future of the global economy and set to shake up the world as rising geo-strategic powers. The past few years have seen mounting economic problems. In September, in a filing with the SEC, Goldman Sachs, reported the closure of the fund – only noticed by Bloomberg in early November.
The BRICS term became increasingly popular way to talk about the future of the global economy in the past decade
The term BRIC was first coined by Goldman Sachs economist Jim O’Neill in 2001 in a paper titled Building Better Global Economic BRICs, in which he pointed out that collectively the growth rate of the four countries put them on course for increasing importance in the 21st century.
Five years later the investment bank set up an in-house investment fund in their name, dedicated to invest in these economies. South Africa was later added to the acronym. At its peak in 2010, the fund had a total of $800m worth of assets under management.
The BRICS term became increasingly popular way to talk about the future of the global economy in the past decade, with summits – hosted at the behest of BRICS economies – making use of the name. In 2014 the five BRICS economies joined together to form the New Development BRICS bank – a global development fund aimed at challenging the power of the World Bank and IMF.
However, the past few years have seen economic instability in most of the BRICS economies. Brazil faces a contraction of growth this year, along with inflation and a budget crisis, while Russia is mired in economic sanctions and the affect of the end of the commodity super cycle and South Africa has seen its GDP growth dip in 2015. China has seen a slowdown of its economic growth and unrelated turmoil in its stock markets – although its growth slowdown is an inevitable part of its transition to a medium income economy, it should be noted.
This change of fortunes in the BRICS has seen increased loses and poor performance for the fund leading to Goldman to disengage from these economies, with the fund dwindling to just $100m in 2015 before its eventual closure.
