It used to be the case that there were not many exchange-traded fund (ETF) options for gaining exposure to African markets. However, while there still isn’t a plethora of funds targeting Africa, there are more ETF choices.
Choose from company-specific ETFs to one which targets all of Africa. Here are some of the most popular Africa ETFs that can give you access to the region.
- Over the last few years, investors have gained more ways to invest in exchange-traded funds from Africa.
- The Africa ETFs are mostly comprised of financial, consumer discretionary, material, consumer staples, and communications holdings.
- Some of the Africa ETFs have derivatives in their holdings that can create more risk for certain investors.
AFK - Market Vectors Africa ETF
AFK follows the Dow Jones Africa Titans 50 Index. This index focuses on companies that are located in Africa and are listed on the African Stock Exchange. These companies also conduct 50% of their business in the region.
AFK targets a broad range of sectors and African countries, including exposure to some less traditional frontier markets. And as for the benchmark, the weighting of a country in the index is determined by the size of its gross domestic product.
And along with holding equities, AFK also uses derivatives such as forwards, futures, swaps, and options that help track the correlating index. Some of the top holdings in the fund and index are Nigerian Breweries, Tullow Oil, Attijariwafa Bank, and Orascom Construction.
EZA - iShares MSCI South Africa Index ETF
EZA targets South Africa by tracking the MSCI South Africa Index, which focuses on publicly traded securities in the South African equity market. Some of the top holdings include MTN Group, Sasol LTD, and Naspers LTD. Some of the top sectors represented in the fund are Financials, Materials, Telecommunications, and Consumer Discretionary.
GAF - SPDR S&P Emerging Middle East & Africa ETF
GAF targets Africa and the Middle East by correlating with the S&P Mid-East and Africa BMI Index (STBMMEU). It includes some of the same top holdings as EZA but also includes AngloGold, Impala Platinum, and Firstand. Some of the top sectors represented in the SPDR are Financials, Materials, Telecommunications, and Consumer Discretionary.
The Africa ETF market is still growing, so you'll find holdings from many of the same companies within the different funds.
NGE - MSCI Nigeria ETF
The MSCI Nigeria ETF attempts to mirror the MCSI All Nigeria Select 25/50 Index performance with extra holdings. The index and the ETF are both primarily made up of consumer staples, financials, and materials. Top holdings in the ETF are Dangote Cement, Guaranty Trust Bank, Zenith Bank, FBN Holdings, and Sterling Bank.
So if Africa is where you want to be (investment-wise), you should research some Africa ETFs and see if they fit your portfolio. While some of these funds may be attractive, be sure to conduct thorough research before making any trades.
Check the history of the ETF, understand the risks, watch the fund in action and see how it reacts to different market conditions. Also, take a look at what is in the funds as many ETFs may contain derivatives such as futures and options.
And if you have any questions or concerns, be sure to consult a financial professional, such as a broker or advisor. However, once you are comfortable with these Africa ETFs, it’s only a matter of calling your broker (unless you trade online).