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?

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.)
I’d be happy to hear of, and perhaps invest in a frontier Africa fund
What about investment vehicles like the Duet Africa Index Fund (http://www.duetgroup.net/) or the Africa Opportunity Fund (http://www.africaopportunityfund.com/index.php?menu=2). They may be less accessible than the above ETFs, but would certainly offer better Sub-Saharan ex. South Africa exposure.
You’re absolutely right. I’ll try to dig into both of these funds in future posts.
Would love for you to do an update of this comparison! Really awesome if you added a note on relative annual cost of owning these funds. Sometimes fees can eat up all the profits.
Yes, I too would like to see this Africa research updated.
Thanks for the feedback, Lisa and Anon. I’ll schedule an update on the post calendar.
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.
Thanks, David. I’m glad you find it useful!
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?
Cheers
John
Hi John,
I believe EZA is the only one of these ETFs with options, and I believe TradeKing.com allows you to trade them.
Happy Investing!
Ryan
Hi Ryan my name is allan am interested in investing in African. Have never done this before can you please guide me on what to do.
Most likely want to invest in uganda
Hi Allan,
Here’s an article that you may find useful:
How to Invest on the Uganda Securities Exchange
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.
Dan
I’m with you, Dan. Thanks for your comment.
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?
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!
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.
Dan
Thanks for this, Dan. Those interested in reading the article can find it here.
All,
I found another interesting piece on Africa, this one on telecoms and cell phone penetration / availability.
http://www.reuters.com/article/2013/01/31/us-africa-telecoms-idUSBRE90U0MK20130131
It is a quick but interesting read.
Dan
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.
Dan
Another interesting piece on expansion of African banking.
http://www.reuters.com/article/2013/04/12/us-africa-banks-idUSBRE93B0P720130412
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?
BR
So glad to see this article. A much needed breakdown of where the funds work. I still think Kenya’s exposure is not high enough. I’m waiting for the Kenyan government to approve this. http://www.etftrends.com/2013/07/kenya-to-launch-first-etfs/
Fingers-crossed.
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.
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!
Ryan
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.
Thamks
Chuck R.
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
Good point, Suren. NAFAX’s fees are high, and I should have examined this in the post. The front-end load is a big hole to dig out of.
I cannot seem to access the tables?
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.
Any luck in updating the tables?
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,
Try looking at Ashburton Africa Equity Opportunities Fund and RMB top 40 ETFs. DO get in touch if you need help in subscribing
Your articles are worth the time Ryan, keep up the spirit please.
Regards.