Market Vectors Africa Index (NYSEArca: AFK) is the only ETF that provides pure exposure to the continent’s expanding economy but potential long-term investors should be ready for a bumpy ride.
“For investors, there are some exchange traded funds focused on Africa. While the vehicles are ready to go, investors should climb aboard only if equipped with ample supplies of patience,” writes John Prestbo, former editor and executive director of Dow Jones Indexes, for MarketWatch.
AFK holds assets of $94 million and charges a net expense ratio of 0.80%.
There are also single-country ETFs for Africa such as Market Vectors Egypt (NYSEArca: EGPT) and iShares MSCI South Africa (NYSEArca: EZA). [More Problems Looming for South Africa ETFs]
The Egypt fund has been hit recently by political instability as investors keep a close eye on the protests in Turkey. [Egypt ETF Rocked by Protests]
Another ETF that partially invests in Africa is SPDR S&P Emerging Middle East & Africa (NYSEArca: GAF). Frontier market ETFs also have allocations to Africa. [Investors Exploring Frontier Market ETFs]
Turning back to AFK, Prestbo notes the ETF’s tracking index incorporates rules designed to maintain a diversified portfolio.
“First, weightings are limited so that South Africa — the continent’s largest economy with the largest companies — doesn’t dominate the index. The weight of each country is capped at 25% and the ceiling for each component stock is 8%,” he wrote.