This month’s scenario: Your client is a wealthy business owner who wants to increase his portfolio’s exposure to the emerging markets and the BRIC-countries, in particular, by $50,000; he considers this a longer-term holding and is willing to accept substantial volatility.
Research: What research tools do you use to identify prospective funds for clients?
Carl J. Macko of Synergy Capital Management: Morningstar is the leading mutual fund research tool that Synergy Capital Management, LLC uses to build client portfolios.
We use Shareholder Services Group as our client account custodian, which also offers research from Thomson Reports and Credit Suisse Research, among others.
What specific fund categories would you recommend for the client’s consideration and why?
Given that the individual is looking for additional exposure to emerging markets and the BRIC (Brazil, Russian, India and China) countries, in particular, diversified emerging markets would be the category to begin research into an appropriate fund.
I would emphasize with the client the potential volatility within this sector, which can experience moves in the area of 20 percent, 30 percent or even greater on a yearly basis.
For example, the average diversified emerging-markets fund declined by 53.5 percent in 2008 and then increased by 73.61 percent in 2009. The individual must be comfortable with moves of these amounts, and possibly greater, and be willing to hold long-term (three to give years, minimum).
What specific funds and allocations would you recommend within those categories?
Currently, there are only two mutual funds that identify themselves as focusing predominantly on BRIC countries: the Goldman Sachs BRIC Fund (GBRIX) and the Templeton BRIC Fund (TABRX).