11 Africa-Focused Mutual Funds and ETFs

The US investment community is waking up to the African growth story. As a result, an increasing number of mutual funds and ETFs now boast significant African stock holdings.

But Africa is not a country. It’s a diverse continent with a myriad of different cultures, leaders, resources, and economies.

So, I thought it might be helpful to dig into these US funds’ portfolios to determine where exactly they are placing their bets.

Investing in the Sub-Sahara

The table below lists 11 funds ranked according to their degree of sub-Saharan African exposure.

Fund Name Ticker Sub-Saharan Weight Portfolio Date
iShares MSCI South Africa Index EZA 100.0% 11/13/2012
SPDR S&P Emerging Middle East and Africa GAF 91.3% 11/13/2012
Commonwealth Africa Fund CAFRX 84.6% 7/31/2012
Nile Pan Africa Fund NAFAX 84.5% 6/30/2012
Market Vectors Africa Index ETF AFK 59.2% 11/13/2012
T. Rowe Price Africa & Middle East TRAMX 46.2% 7/31/2012
Wasatch Frontier Emerging Small Countries Fund WAFMX 32.4% 6/30/2012
Templeton Frontier Markets TFMAX 23.2% 6/30/2012
HSBC Frontier Markets Fund HSFAX 17.5% 9/30/2012
iShares MSCI Frontier 100 Index Fund FM 15.5% 11/14/2012
Harding Loevner Frontier Emerging Markets Portfolio HLMOX 14.5% 4/30/2012

To me, the Sub-Saharan weights of the Market Vectors Africa ETF (AFK) and T. Rowe Price’s TRAMX are the table’s biggest surprises.

How is it that these two Africa funds deploy only half of their assets to sub-Saharan stocks?

Photo by Weesam2010

Well, AFK invests heavily in North Africa and in companies that do business in Africa but which are domiciled in the US, Europe, or Australia. The same goes for TRAMX, but, unlike AFK, it also invests in Middle Eastern stocks.

Now, let’s check out the sectors that each fund invests in.

Screening Out the Mining and Oil Plays

I’ve often noted that I’m not a fan of mining and oil stocks. I see the most long-term, sustainable growth in sectors with more direct exposure to the African consumer — banking, retail, and construction.

The following chart measures the exposure of each fund to sub-Saharan listed stocks excluding those mining and oil companies.

Fund Name Ticker Sub-Saharan Weight (excl. Mining & Oil)
iShares MSCI South Africa Index EZA 73.6%
Nile Pan Africa Fund NAFAX 72.5%
SPDR S&P Emerging Middle East and Africa GAF 68.2%
Commonwealth Africa Fund CAFRX 51.9%
Market Vectors Africa Index ETF AFK 43.1%
T. Rowe Price Africa & Middle East TRAMX 38.7%
Wasatch Frontier Emerging Small Countries Fund WAFMX 32.2%
Templeton Frontier Markets TFMAX 22.9%
HSBC Frontier Markets Fund HSFAX 17.5%
iShares MSCI Frontier 100 Index Fund FM 15.5%
Harding Loevner Frontier Emerging Markets Portfolio HLMOX 13.8%

Now we see some real separation between the funds that give their investors exposure to the rise of an African middle class (EZA, NAFAX, GAF) and those that bet heavily on natural resources (CAFRX) or other geographic regions (HLMOX).

But let’s dig still deeper.

Who’s Investing In Frontier Africa?

Clearly, many of these funds invest heavily in South African stocks. South Africa, with its relatively developed infrastructure, and slower economic growth rate may not offer the same ground floor investment opportunity that faster growing countries like Nigeria and Kenya do.

This next table screens out South African stocks from each fund’s portfolio to determine which one invests most heavily in rising incomes in the African frontier.

Fund Name Ticker Sub-Saharan Weight (excl. South Africa)
Nile Pan Africa Fund NAFAX 25.1%
Wasatch Frontier Emerging Small Countries Fund WAFMX 23.9%
Market Vectors Africa Index ETF AFK 20.8%
Templeton Frontier Markets TFMAX 18.9%
HSBC Frontier Markets Fund HSFAX 17.5%
iShares MSCI Frontier 100 Index Fund FM 15.5%
Harding Loevner Frontier Emerging Markets Portfolio HLMOX 13.8%
T. Rowe Price Africa & Middle East TRAMX 10.7%
Commonwealth Africa Fund CAFRX 4.0%
iShares MSCI South Africa Index EZA 0.0%
SPDR S&P Emerging Middle East and Africa GAF 0.0%

So, there you have it. If you are in the market for an Africa-focused mutual fund with significant exposure to frontier markets, then you should take a close look at the Nile Pan Africa Fund (NAFAX).

You might consider the Wasatch Frontier Emerging Countries Fund if you’re less biased toward Africa and more concerned about geographic diversification.

The bigger revelation for me, however, is that there appears to be an excellent opportunity to launch a frontier Africa fund.

Any takers?

(Levar Hewlett contributed to this blog post.)

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  1. David says

    I’d just like to thank you for all the information you provide. This is just the type of analysis that really helps me make the decisions I have to make with my investments.

    Keep up the good work – it is much appreciated.

  2. John says

    Hi Ryan

    Just left a message on another forum, didn’t realize you had many other articles. This article seems closely related to what I was after, do you know of any trading platforms which allow you to trade any of the ETFs you mentioned here?



  3. Dan Odess says

    Thanks for posting this article. Very useful. I would consider investing in a Frontier’s type fund focused on Africa, especially sub-Saharan Africa. The one caveat is that I am not willing to invest in a fund with holdings that include tobacco companies. I cannot in good conscience invest in companies whose products perpetuate misery and suffering in a region that has seen far to much of it in the past few hundred years.

    Thank you.


  4. says

    Very interesting, can you perhaps expand on this to include size of fund, returns over one, three and five years. Also how returns have compared to other blue chip opportunities in Africa such as investing with the largest Africa asset managers and their top performing funds? Secondly, are asset managers emerging in for instance in Nigeria that can compete in size and performance with the longer established Africa asset managers?

    • says

      Great questions, Harry. There are indeed asset managers across the continent with more than enough chops to compete with their North American counterparts. I hope to tap into the expertise of these managers in future posts. Stay tuned!

  5. Dan Odess says

    Interesting piece in the most recent Economist on signs emerging in the Islamic world that science is making a comeback. I thought I’d mention it here since parts of the region are affected. The numbers are still pretty grim, but some countries are beginning to increase funding for non-religious education and science. I can’t help but think that this is a positive long-term trend for the region which will be a strong economic driver.


  6. Dan Odess says

    The current issue of the Economist (March 2) contains a special 14 page report on Emerging Africa. The focus is on Sub-Saharan Africa. It is an interesting read.


  7. Derrick says

    Thanks so much for your article. I live in Europe and was wondering if there is some kind of analysis like the one you have done for European funds investing in Africa?


  8. Anne says

    Hi Ryan ,
    I have enjoyed reading your articles on investing in Africa. I would love to learn from you how one can make good money in the stock market . Thank you.

    • says

      Thanks, Anne. Great question.

      Here’s the short answer.

      Buy shares of profitable companies that you understand. Buy them at a fair price. And hold the shares for the long-term.

      Look for companies that grow their earnings and pay a dividend consistently year after year. Buy them when their price/book or price/earnings ratios are lower than most other shares listed on the market. And then hold the shares until the company stops growing earnings or paying a dividend consistently or until its price ratios are higher than most other stocks on the market.

      Follow these guidelines and the stock market should treat you very well over the long-term.

      Hope this helps!


  9. Chuck R. says

    Thanks Ryan for a friendly. easy to understand and informative introduction to investing in the growth potential of sub saharan africa. I’ll be doing a lot more research to find the vehicle I’m comfortable with, (stock, etf, fund), and then working through Scottrade here in the US. I recommend it to anyone who can access it. I’ve already invested in MIXT as a way to tap into the growth of the greater continent through a South African company. Alas, I am patiently waiting for the investment to turn green.

    Chuck R.

  10. Suren says

    NAFAX has front-end load of 5.75 percent, not to mention a high expense ratio of 2.49 percent. That does not look good for overall returns to the investor

    • Ryan Hoover says

      I’m afraid I lost the data in the tables when I migrated to a new platform. Argghh…

      Sorry about this, Glenda, and I will work to update the tables asap.

  11. Catherine Beck says

    Hi, Ryan

    You are doing good work here on behalf of sub-Saharan Africa, Africans and Afro-philes. I wish I could have seen the tables before your site migrated. A bit like you, I volunteered in Chobe, Botswana, for 4 years (in the 80s) and would like to invest in the region. Your site has given me the leg up I needed.

    All the best,

  12. Vijay Narayanan says

    Try looking at Ashburton Africa Equity Opportunities Fund and RMB top 40 ETFs. DO get in touch if you need help in subscribing

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