BRIC Countries or BIC Countries?

For a decade, the “BRIC” countries have attracted investors seeking to participate in rapid growth in Brazil, Russia, India and China, but high net worth investors appear to be overlooking the “R” in favor of the “B,” “I” and “C.”

The term BRIC was coined by Goldman Sachs in 2001 to describe four countries likely to be among the world’s six largest global economies by 2030, according to company literature promoting the Goldman Sachs BRIC Fund. The GS BRIC Fund invests primarily in stocks in companies domiciled in Brazil, Russia, India and China or in companies participating in these markets.

“BRIC countries offer young populations, rapidly expanding domestic markets and economies that are growing at a significantly faster rate than most G7 countries,” said Goldman Sachs. The G7 countries – Canada, France, Germany, Italy, Japan, the United Kingdom and the United States of America – are the G8 minus Russia.

Though Goldman Sachs predicts all four BRIC nations will play an increasingly pivotal role in the global economy, high net worth investors are placing most of their money on China and Brazil, according to a fourth quarter study by Millionaire Corner on financial products used by wealth investors.

High net worth individuals – those with investable assets of $5 million to $25 million – report they are most likely to invest in China (27 percent) and Brazil (25 percent) in 2012, according to our research. Canada edges out India, appealing to 17 percent of high net worth investors, while India attracts 16 percent. Russia falls to the bottom of the list of nations in terms of appeal to high net worth investors. Even debt-burdened Europe is a more likely investment, followed by Australia, Korea, Japan and the United Kingdom. Only 4 percent of high net worth investors say they are likely to invest in Russia over the next 12 months.

Russia’s vast natural gas resources – the nation exports one-third of the world’s supply –  – will help fuel urbanization and industrialization in India and China, according to the Goldman Sachs report,  but high net worth individuals are not likely to invest in the commodity rich nation.

As Goldman Sachs notes, the securities markets of BRIC countries and other emerging countries are volatile, less liquid, subject to currency fluctuations and vulnerable to sudden social and political events. Adding to the risk, is the lower level of government regulation and accounting and reporting requirements than the markets of developed countries. High net worth investors appear to be willing to accept the risks posed by three out of four of the BRIC countries, but are leaving Russia out in the cold.