BRICS+ and contested global leadership: implications for investment management
The second study of the Pictet Research Institute explores the rise of the BRICS+ coalition as a counterweight to the G7 amid shifting economic dynamics. It examines how BRICS+ challenges the Western-led international system and the implications for investment strategies in a polarised world. The research emphasises the need for a thematic and active investment approach as new growth drivers like technology, energy supply, resources and productivity advantages reshape the global economic landscape.
Divisive bilateral disputes between BRICS+ members and the fearsome rhetoric of nationalist politics do not mean its leaders will not find a way to cooperate to achieve their common objectives. The BRICS+ countries have more than enough incentive to extend mutual cooperation in their overriding imperative to reform the existing international system, sideline the West, gain a firmer hold on international institutions and build up a strong base for strategic autonomy. This underlines the importance of understanding their motivations for forming and developing the coalition, with a view to discerning how its rise affects the investment universe.
The BRICS+ economies should grow 3.8% on average over the next five years, way ahead of the 1.74% estimated for the G7 and EU combined. BRICS+ demographics are a source of relative economic vitality giving the bloc an advantage over the G7/EU.
What could this mean for investing?
It might be beneficial to explore thematic or multi-asset strategies for portfolio diversification, along with active management. Over time the allure of passive management, which has owed its rise and current dominance to the time of unfettered free trade and globalisation, could erode.
