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Goldman Is Pulling the Plug on its BRIC Fund

BRAZIL-BRICS-FAMILY PHOTOGRAPHBRAZIL-BRICS-FAMILY PHOTOGRAPH
From left to right: Russia's President Vladimir Putin, India's Prime Minister Narendra Modi, Brazilian President Dilma Rousseff, China's President Xi Jinping and South Africa's President Jacob Zuma join their hands during the official photograph of the 6th BRICS summit in Fortaleza, Brazil, on July 15, 2014.Photograph by Nelson Almeida — AFP/Getty Images

Goldman Sachs (GS) is merging its nine-year-old BRIC fund—which invests in Brazil, Russia, India, and China—into a broader emerging markets investment vehicle after poor performance and an uncertain outlook for the four economies.

In a filing with the Securities and Exchange Commission first noticed by Bloomberg, the bank’s asset management unit said they could not see “significant asset growth in the foreseeable future” for the fund.

The fund had seen its assets decline to $98 million at the end of September after peaking at $842 million in 2010—a decrease of 88%, according to data compiled by Bloomberg. Instead, the new Emerging Markets Equity Fund will invest at least 80% of its assets in a diversified portfolio of emerging market equities.

The folding of the BRIC fund comes 14 years after former Goldman Sachs economist Jim O’Neill famously coined the acronym to describe what he saw as the world’s most promising economies. In a paper titled “Building Better Global Economic BRICs,” O’Neill vouched for the emergence of the four countries—with an output that then made up around 8% of the global GDP—as key players in the worldwide economy of the next decade. The acronym would later be expanded to “BRICS” to accommodate South Africa.

Recently, however, Brazil and Russia have entered a period of economic contraction, and China, once considered the lynchpin of BRIC growth, has seen its economic growth slow down, and has experienced a mid-year stock market sell-off. Under Prime Minister Narendra Modi, India’s economy is projected to grow at a rapid 7.2% annual pace this year, but as stated by the World Bank, the country is still in need of wider reforms.

Goldman’s BRIC fund outflows follow similar moves at other investment funds since 2010. According to EPFR Global and updated data from Bloomberg, investors have withdrawn $1.4 billion from funds investing in BRIC countries this year, and the outflow since the end of 2010 has reached $15 billion.