The age of Brics may have crumbled but investors should now look to the Varp countries for long-term, frontier market growth, GAM’s Tim Love has said.
Love, who runs the Julius Baer EF Emerging Equity fund, said the collective geographies, languages and business cultures was diverse in Vietnam, Argentina, Romania and Pakistan but the growth outlook was equally exciting.
The quest to find the new Brics – Brazil, Russia, India and China – has become a running theme among emerging market investors, particularly given the struggles of these four nations over the past four years.
This has included the so-called Civet nations – Colombia, Indonesia, Vietnam, Egypt and Turkey – as well as the Next 11, which was a much-wider pool of developing nations grouped together by Goldman Sachs.
However, Love said the four countries that comprise Varp offer the cutting edge of frontier market opportunities, despite their relatively small size.
‘The Varp economies are over 13 times smaller than the Brics and therefore we do not expect them to help drive the global economy in the same way, or to generate the same levels of returns for investors.
‘However, these markets can offer a deeper dimension to an emerging markets portfolio with potential attractive risk returns – because of their diversity,’ he added.
Despite the strong reference to Varp, Love’s main fund remains largely positioned towards the Bric nations. These include a 32.7% allocation to China, 10.2% invested in Brazil, 6.7% allocated to Russia and 6.2% invested in India. At present, he has 9.7% in cash or cash equivalents.