Revisiting Bloody Ridiculous Investment Concepts

Find someone who loves you like sellside analysts love coming up with painful acronyms for arbitrary groupings of stocks and countries.

Stephanie Stacey’s great post on the desperate efforts to come up with a European version of the Magnificent Seven (get your tee here) reminded Alphaville of the silly attempts to find a successor to BRICs over the years.

Goldman Sachs’s then-chief economist Jim O’Neill first tried to repeat the BRICs magic by anointing Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, the Philippines, South Korea, Turkey and Vietnam as the “Next Eleven” back in 2005.

The challenge of turning this motley crew into a usable acronym meant that O’Neill simply called them the N-11. But obviously that wouldn’t do, so he eventually separated Mexico, Indonesia, South Korea and Turkey into a group he called MIST or MIKT.

Then, showing a lack of commitment to the acronym — or perhaps recognising that South Korea was hardly an emerging economy anymore — O’Neil swiftly subbed in Nigeria to make the MINTs.

Here’s how they’ve done over the past decade versus US and global equities. Oops.

These are rebased MSCI net return indices, in dollars, for each country, and the MSCI USA and World indices. The performance of US stocks over the past decade has obviously been phenomenal, but of all these MIST/MIKT/MINT markets, only South Korea has matched the broader MSCI Emerging Markets index (NB, the MSCI Nigeria index has only nine members).

Let’s take a look at another briefly-popular investment acronym from the era: CIVETS, or Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa.

This acronym appears to have been coined by the Economist Intelligence Unit’s Robert Ward, and has some overlap with the MIST/MIKT/MINT countries (Turkey and Indonesia are in both). HSBC launched a fund based on the concept, but quickly shuttered it. You can see why.

Once again, stark underperformance, and even undershooting the MSCI EM index over the past decade.

Of course, O’Neill et al were mostly talking about these countries as burgeoning economies with tons of potential. And many of these countries have indeed subsequently done well.

However, they were packaged up and sold as equity investment theses, despite the fact that the link between the pace of economic growth and stock market returns is remarkably weak.

There’s a reason why SocGen’s Albert Edwards called the BRICs a “bloody ridiculous investment concept”. Over the past decade none of the BRICs have beaten US stocks, and over the past 20 years only India has done so.

Not that this has and will deter analysts, investors and financial pundits. We’ve also had TMT, BATs, FANGs, GIPSIs, and, well, all of ESG. But Alphaville’s willingness to battle Workspace and our own chart-building tool is fading. Suffice to say you should always be sceptical of investment acronyms.