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Goldman Sachs Group Inc/The
Wells Fargo & Co
In 2001, Jim O’Neill kicked off a decade-long investment boom with a catchy acronym for the four largest emerging-market economies—Brazil, Russia, India, and China. The Goldman Sachs (GS) Asset Management chairman is now promoting a new foursome of fast-track countries: Mexico, Indonesia, South Korea, and Turkey.
In terms of GDP and fund holdings, the MIST nations are the biggest markets in Goldman Sachs’s N-11 Equity Fund. Launched in February 2011, the fund has $113 million in assets (as of June 30) spread out across 73 stocks. So far this year, N-11 has outperformed Goldman Sachs’s $410 million Brazil, Russia, India, and China fund, climbing 12 percent, compared with a 3.2 percent gain for the BRICs. “We see steady inflows into the Next 11 fund each week,” says O’Neill, who isn’t involved in managing either fund.
Besides the MIST countries, N-11 includes Bangladesh, Egypt, Nigeria, Pakistan, the Philippines, and Vietnam. Iran is also a member, though U.S. sanctions strictly limit how banks invest there. With populations generally younger than those of the U.S. and Europe, N-11 nations are getting more attention from investors.
“You’ve seen a rotation in the leadership based on rate of economic growth,” says Paul Christopher, chief international strategist at Wells Fargo Advisors (WFC). Investors poured about $67 billion into BRIC stocks from 2001 through 2010, during which period they beat the Standard & Poor’s 500-stock index by 281 percentage points. They withdrew about $15 billion last year as those economies cooled, according to Cambridge (Mass.)-based research firm EPFR Global.
Not to be outdone, Citigroup (C) last year introduced CARBS—a designation that stands for Canada, Australia, Russia, Brazil, and South Africa. As a group, these countries supply 25 percent to 50 percent of the world’s commodities. Analysts at BlackRock (BLK) came up with the fiscally strong CASSH economies, as in Canada, Australia, Singapore, Switzerland, and Hong Kong. And then there are the PIIGS (Portugal, Ireland, Italy, Greece, and Spain). O’Neill has resisted requests from Goldman Sachs salespeople to start a MIST fund for two reasons. It would be somewhat redundant, since the four countries already account for three-quarters of the N-11 fund. In addition, says O’Neill: “I’m also quite cognizant of not going down in history as being the guy that just constantly created acronyms.”
The bottom line: As investor ardor for the BRICs cools, Goldman Sachs is romancing clients with a new emerging-markets acronym, the MISTs.