This ETF aims for growth by tracking the FTSE Bric 50 index, which was launched in March to provide access to the 50 largest companies within Brazil, Russia, India and China. Constituents include Russian oil and gas producer OAO Gazprom, Indian software and computer services company Wipro Corporation and the Industrial and Commercial Bank of China.
ETFs are similar to tracker funds that passively track an index but the difference is they can be traded like a share, enabling investors to get in and out of the market quickly, while providing diversity of shares like an Oeic or unit trust.
The Bric concept has taken off among active fund managers over the last couple of years as a result of the rapid growth in Brazil, Russia, India and China. This growth looks set to continue over the long term, despite periods of volatility that are expected in the short-term. Some investors could welcome access to these markets through an ETF that spreads the risks of individual companies, sectors and countries.
As ETFs are passive funds, they are cheaper than investing in actively managed Bric funds. While the total expense ratio for this ETF is 0.74 per cent, investors in actively managed Bric funds would pay initial and annual management charges. Whereas an ETF only provides exposure to the companies on the index, an active manager may add value by outperforming the index.
However, stock selection may be constrained by the need to have exposure to all four regions and the higher charges relative to ETFs would also have an impact on the returns for investors.