South Africa's Absa Capital, the corporate and investment banking division of Barclays Capital's affiliate Absa Bank, is pushing emerging markets underlyings to investors with special emphasis on promoting the use of BRIC economies in their portfolios.
Vladimir Nedeljkovic, head of investments at Absa Capital said there is increasing demand for investments in the BRIC regions, although volatility is a concern: "One way to smooth the returns on such investments is through the use of proven algorithmic strategies that dynamically allocate funds between the risky asset, the index, and the safe assets such as cash, depending on the volatility in the market," he said.
Absa Capital said that the reason for investors recently retreating from emerging markets exposure in favour of developed markets, was largely due to the risk-aversion stance underway in response to the European debt crisis. However, the firm said, the BRIC group of economies is still a geographical asset class that offers relatively good value for investors.
"Absa Capital has seen a lot of interest expressed after the recent launch of the LEIPS BRIC Optimiser - a protected investment that gives investors exposure to the equity market along with capital protection and a reduction in volatility," said Nedeljkovic.
The LEIPS BRIC Optimiser is a structure aimed at limiting the overall volatility of a portfolio by over-allocating toward low risk assets such as cash when the market volatility is high, while allocating more to equities when markets are smoother than usual.
Absa Capital's BRIC Optimiser is based on the S&P BRIC 40 Daily Risk Control 15% Index.