What is CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa)

CIVETS is an acronym for the countries Colombia, Indonesia, Vietnam, Egypt, Turkey, and South Africa, which in the late 2000s were widely regarded as the next emerging markets economies that would rise quickly during the coming decades. The acronym CIVETS was coined in 2008 at the Economist Intelligence Unit (EIU) in London. CIVETS plays off of another acronym, BRIC (Brazil, Russia, India and China), which was created by Goldman Sachs’ chief economist in 2005, for another group of emerging markets countries, which was then thought to be the next rising star.

Breaking Down CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa)

CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa) countries are alleged to be the next-generation of “tiger countries” because they share fast-growing, relatively diverse economies as well as large populations that are younger than age 30. Hence, these countries have great potential for high levels of growth in domestic consumption. Other positive aspects of this group include relative political stability (especially when compared to previous generations), a focus on higher education, reasonably sophisticated financial systems, and growing economic trends overall. Moreover, the CIVETS economies are generally dynamic without the dependence on external demand or commodity exports that characterize some parts of the emerging world. They also have a relatively low level of public debt, as well as corporate and household debt.

New Acronyms Bring New Investment Opportunities

Exposure to CIVETS countries has become possible for retail investors through the use of exchange-traded funds (ETFs). For example, in 2011 Standard & Poor’s launched its S&P CIVETS 60, which targets second-generation emerging markets investments. The S&P CIVETS index includes 60 components, consisting of ten liquid stocks from each of the six targeted countries, trading on their respective domestic exchanges.

A Sign of the Times

Also in 2011, HSBC Global Asset Management introduced a fund with a similar concept—the HSBC Global Investment Funds (GIF) CIVETS fund, which targeted long-term returns by investing in a diversified portfolio of equities from the CIVETS countries, as well as other countries with similar demographics. Yet, another acronym for a bundle of developing countries was coined by Goldman Sachs; the Next Eleven (N-11), which purportedly had the potential to become the world's largest economies in the 21st century; and there were others.

Acronym Investing — A Fad? Or the Future?

When economists study the early 21st century from afar, will they view this type of tool as a temporary trend in emerging markets investing? Or will it have proved to endure?

The wisdom of “acronym investing” — putting money into small groups of markets that often have little in common beyond a broad economic concept — is debatable among investment professionals. While it is true that many of the CIVETS countries, and others lumped under separate acronyms, have (at least until recently) enjoyed turbo-charged economic growth, it also is true that investment gains are not guaranteed. The combined gross domestic product (GDP) of CIVETS countries was predicted to account for half of the global economy by 2020; however, since the prolonged economic slowdown after 2011, we rarely hear the terms BRIC and CIVETS anymore.

More than a decade after the creation of CIVETS, many fund managers do want exposure to many of the countries in these various groups, but they want exposure to them individually. Some others are suspicious of acronyms that they might view as marketing hype. In any case, although CIVETS are as worthy an investment tool as any, relying exclusively on demographics to make investment decisions will always be risky because demographics change; that is their nature.