What are the Next Eleven?
Goldman Sachs' List of 11 Future Economic Giants
The Next Eleven, also known as N-11, is a term coined by Goldman Sachs in late-2005 to represent eleven countries could have BRIC-like potential in rivaling G7 nations. While these countries are significantly smaller than G7 and even BRIC members, the investment bank insisted that the foundation was in place for future growth over the coming years.
The N-11 includes Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, Turkey, South Korea, and Vietnam. Most of the group's total gross domestic product (GDP) comes from Mexico, Indonesia, South Korea and Turkey, whose economies have grown significantly over the past few years.
Next Eleven Growth Prospects
Investors are interested in the Next Eleven, all of which have economies with significant 21st-century economic growth. These rates have generally risen all across the group, despite the 2008 economic crisis, while dispersion in growth remains at relatively low levels, suggesting that the countries' economic performance is stable.
Nevertheless, as the exchange rate trend has favored the U.S. dollar, some of these countries have struggled and some have had difficulty in repaying dollar-denominated loans. The good news is that Mexico,with its close proximity to the U.S and in response to NAFTA trade agreements has remained economically robust
These growth rates are most attractive when compared to the G7 nations, whose economies have grown at lower rates. In 2005, Goldman Sachs estimated that the N-11 could reach two-thirds of the size of the G7 economies by 2050.
Some of the fastest growing economies in the group by real GDP in 2015 include:
Investing in the Next Eleven
International investors looking to invest in Next Eleven economies have many different options, ranging from mutual funds to exchange-traded funds (ETFs). In general, the ETFs represent the easiest way to invest in N-11 economies given their targeted exposure and instant diversification in a single security traded on a U.S. stock exchange.
Some popular ETFs include:
- Market Vectors Egypt Index (EGPT)
- Market Vectors Indonesia Index (IDX)
- iShares MSCI South Korea Index (EWY)
- iShares MSCI Mexico Index (EWW)
- Market Vectors Africa Index (AFK)
- Market Vectors Vietnam Index (VNM)
- iShares MSCI Philippines Index (EPHE)
- iShares MSCI Turkey Index (TUR)
Some of the smaller N-11 economies do not have ETFs associated with them and may be difficult to easily invest in from the U.S. These, however, may be invested in by means of broad regional ETFs.
Investors looking for exposure in countries not covered by ETFs may want to consider American Depository Receipts (ADRs). These securities track foreign corporations, but trade on U.S. stock exchanges, making them a great way to build exposure. But investors should be aware that many ADRs have higher liquidity risks than most U.S. stocks.
Finally, investors should keep some key points in mind when investing in the N-11:
- Geographical Diversification. The N-11 spans Europe, Latin America, Africa, South-East Asia, and the Middle East, making it a very geographically diverse index for investors.
- Wide Variety of Development. The N-11 encompasses countries ranging from the highly developed South Korea to the very poor country of Bangladesh.
- Political Risk in Some Components. The N-11 includes some countries with a lot of political risk, including countries like Pakistan that can prove volatile.