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 NameTickerSub-Saharan WeightPortfolio Date
iShares MSCI South Africa IndexEZA100.0%11/13/12
SPDR S&P Emerging Middle East and AfricaGAF91.3%11/13/12
Commonwealth Africa FundCAFRX84.6%7/31/12
Nile Pan Africa FundNAFAX84.5%6/30/12
Market Vectors Africa Index ETFAFK59.2%11/13/12
T. Rowe Price Africa & Middle EastTRAMX46.2%7/31/12
Wasatch Frontier Emerging Small Countries FundWAFMX32.4%6/30/12
Templeton Frontier MarketsTFMAX23.2%6/30/12
HSBC Frontier Markets FundHSFAX17.5%9/30/12
iShares MSCI Frontier 100 Index FundFM15.5%11/14/12
Harding Loevner Frontier Emerging Markets PortfolioHLMOX14.5%4/30/12

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 NameTickerSub-Saharan Weight (excluding Mining and Oil)
iShares MSCI South Africa IndexEZA73.6%
Nile Pan Africa FundNAFAX72.5%
SPDR S&P Emerging Middle East and AfricaGAF68.2%
Commonwealth Africa FundCAFRX51.9%
Market Vectors Africa Index ETFAFK43.1%
T. Rowe Price Africa & Middle EastTRAMX38.7%
Wasatch Frontier Emerging Small Countries FundWAFMX32.2%
Templeton Frontier MarketsTFMAX22.9%
HSBC Frontier Markets FundHSFAX17.5%
iShares MSCI Frontier 100 Index FundFM15.5%
Harding Loevner Frontier Emerging Markets PortfolioHLMOX13.8%

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 NameTickerSub-Saharan Weight (excluding South Africa, Mining, and Oil)Frontier African Countries Represented
Nile Pan Africa FundNAFAX25.1%Nigeria, Ghana
Wasatch Frontier Emerging Small Countries FundWAFMX23.9%Nigeria, Kenya, Ghana, Namibia
Market Vectors Africa Index ETFAFK20.8%Nigeria, Kenya
Templeton Frontier MarketsTFMAX18.9%Nigeria, Kenya, Zimbabwe, Mauritius, Ghana, Malawi
HSBC Frontier Markets FundHSFAX17.5%Nigeria, Kenya
iShares MSCI Frontier 100 Index FundFM15.5%Nigeria, Kenya, Mauritius
Harding Loevner Frontier Emerging Markets PortfolioHLMOX13.8%Nigeria, Kenya, Ghana, Mauritius, Senegal
T. Rowe Price Africa & Middle EastTRAMX10.7%Nigeria, Ghana, Zambia
Commonwealth Africa FundCAFRX4.0%Nigeria, Kenya
iShares MSCI South Africa IndexEZA0.0%
SPDR S&P Emerging Middle East and AfricaGAF0.0%

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?

Comments

  1. I’d be happy to hear of, and perhaps invest in a frontier Africa fund

  2. Graham Dodd says:

    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.

  3. 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.

  4. 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

  5. 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

  6. 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!

  7. 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.

    Dan

  8. 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

  9. 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.

    Dan

  10. Dan Odess says:

    Another interesting piece on expansion of African banking.

    http://www.reuters.com/article/2013/04/12/us-africa-banks-idUSBRE93B0P720130412

  11. 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

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