What Is the MSCI BRIC Index?
The MSCI BRIC index measures the equity market performance of the emerging market indices of Brazil, Russia, India, and China. The MSCI BRIC Index is one of MSCI's Regional Equity Indices and is a free float-adjusted, market capitalization-weighted index of four of the biggest emerging market economies. It was launched and operated by MSCI, a company that provides a variety of financial products and services.
- The MSCI BRIC Index is a free float-adjusted market capitalization-weighted index.
- It was designed to measure the equity market performance of the largest and fastest-growing emerging market economies of Brazil, Russia, India, and China.
- The index is reviewed on a quarterly basis and is rebalanced twice a year.
- The MSCI BRIC Index is heavily weighted in the consumer discretionary, financial services, and communication services sectors.
- The bulk of the index was represented by China, followed by India and Brazil.
Understanding the MSCI BRIC Index
MSCI is an American financial company that specializes in research, data, and technology. It provides financial support and tools that investors can use to make better decisions about their investments. Some of these options include portfolio management tools and analytics. But MSCI is perhaps best known for its indexes. These range from niche investing to country- and region-based investing.
The MSCI BRIC Index was launched on Dec. 30, 1994. As noted above, the index is free float-adjusted and weighted by market capitalization. It was based on the performance of the equity market of the four largest and fastest-growing emerging market economies: Brazil, Russia, India, and China.
The index is reviewed on a quarterly basis: February, May, August, and November. According to MSCI, this prevents any undue index turnover while accounting for any changes in the underlying equity markets of each country. The index is rebalanced every May and November, at which time the small-, mid-, and large-cap cutoffs are recalculated.
The index is heavily weighted in the consumer discretionary industry (21.9%) followed by financials (18.83%) and communication services (12.46%). More than half of the index was represented by China at 61.86% while India and Brazil made up the remainder with 27.94% and 10.2%, respectively. As of Aug. 31, 2022, the index returned 3.10% to investors over a 10-year period and -25.30% over one year. It earned 6.59% since its inception in 1994.
The term BRIC first appeared in a 2001 Goldman Sachs report called "Building Better Global Economic BRICs," identifying the largest and fastest emerging market economies of Brazil, Russia, India, and China. The paper correctly forecasted that the weight of the BRIC economies would grow significantly in the global gross domestic product (GDP)—particularly the economy of China.
An emerging market economy is one that progresses toward becoming advanced, as shown by liquidity levels in local debt and equity markets, as well as the existence of some form of market exchange and regulatory body. Emerging markets are not as advanced as developed countries but maintain economies and infrastructures that are more advanced than frontier market countries.
Emerging markets generally do not have the level of market efficiency and strict standards in accounting and securities regulation to be on par with advanced economies, such as the United States, Europe, and Japan, but emerging markets typically have a physical financial infrastructure. This comes in the form of banks, stock exchanges, and a unified currency.
Investing in BRICs and other emerging markets does come with inherent risks. That's because the markets are not fully developed. Risks such as lack of transparency, undeveloped regulatory systems, liquidity issues, and volatility can affect the performance of investments.
MSCI launched the Emerging Markets Index, which was the first of its kind, in 1988, it now focuses on 24 different emerging market economies. As of September 2022, it focused on 24 emerging market economies with a total of 1,382 constituents.
Investing in Emerging BRIC Markets
Investors can gain exposure to BRIC markets (and other emerging market economies) through an increasing variety of instruments. Some of these options include:
One example of a BRIC market investment includes the MSCI BIC Index ETF (BKF), which was launched by iShares in 2007. As of Sept. 29, 2022, this ETF had 638 constituents and $75.1 million in assets under management (AUM). The management fee for the fund was 0.69%.
Article Update: On March 2, 2022, MSCI reclassified Russia from Emerging Markets to Standalone Market status. The decision closely followed Russia's invasion of Ukraine on Feb. 24, 2022. In consultation with international institutional investors, the participants voted by overwhelming majority that the Russian equity market is currently "uninvestable," and should be removed from the index. As a result, the index is now comprised of three economies: Brazil, India and China, representing 13.01%, 32.71% and 54.27% of the index market capitalization, respectively.