What Is CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey, and South Africa)?
CIVETS is an investing acronym for the countries Colombia, Indonesia, Vietnam, Egypt, Turkey, and South Africa, which in the late 2000s were widely regarded as the next emerging market economies that would rise quickly during the coming decades. The acronym CIVETS was coined in 2009 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 2001 to describe a group of emerging market countries, which were then thought to be the next rising stars.
- CIVETS is an investing acronym for the countries of Colombia, Indonesia, Vietnam, Egypt, Turkey, and South Africa.
- A director at the Economist Intelligence Unit (EIU) coined the acronym in 2009 as a reference to the countries that were considered to be the next rising stars of emerging market countries.
- The CIVETS countries shared many common factors, including fast-growing economies, large populations under the age of 30, and reasonably mature financial systems.
- Some investing professionals have a dim view of acronym investing, which is the practice of putting money into small groups of markets that often have little in common beyond a broad economic concept.
Understanding CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey, and South Africa)
CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey, and South Africa) countries were thought to be the next generation of “tiger economies” because they shared fast-growing, relatively diverse economies as well as large populations that were younger than age 30. Hence, these countries showed 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 were generally dynamic without the dependence on external demand or commodity exports that characterize some economically developing nations. They also had a relatively low level of public debt, as well as corporate and household debt.
Exposure to CIVETS countries became 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 targeted second-generation emerging markets investments. The S&P CIVETS index included 60 components, consisting of ten liquid stocks from each of the six targeted countries, trading on their respective domestic exchanges.
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. However, in 2013, HSBC closed the fund. The company cited the fund's limited growth and its insufficient assets under management as reasons for the decision to shut down the fund.
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.
Criticism of Acronym Investing
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 enjoyed periods of turbo-charged economic growth, it also is true that investment gains are not guaranteed.
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.