Investors previously had few exchange-traded funds (ETF) alternatives when investing in African markets. While there isn't an abundance of money earmarked for Africa, there is more than there used to be.

There are ETFs focused on individual companies as well as those that invest across the continent of Africa. Investing in these widely-held exchange-traded funds (ETFs) might be a convenient way to gain exposure to Africa.

Market Vectors Africa ETF

Dow Jones Africa Titans 50 Index is AFK's benchmark. Companies that operate on the African continent and are traded on the African Stock Exchange are the primary focus of this index. More than half of these firms' total sales are generated in the area. AFK goes after a wide range of African markets, including some non-standard frontier markets.

A country's GDP size corresponds to its relative importance in the benchmark index. AFK employs derivatives such as forwards, futures, swaps, and options in addition to its stock holdings to mimic the performance of the corresponding index.

The iShares MSCI South Africa Index ETF

EZA follows the MSCI South Africa Index, which includes stocks and bonds traded on the South African stock exchange. The fund primarily invests in the financial sector, but it also holds shares in the materials sector, the technology sector, the consumer discretionary sector, and the consumer staples sector.

SPDR S&P Middle East & Africa ETF

The S&P Mid-East and Africa BMI Index provide a focal point for GAF's regional focus on Africa and the Middle East (STBMMEU). AngloGold, Impala Platinum, and First are included, along with some of the same top holdings as EZA. The SPDR invests in various industries, including financials, minerals, telecommunications, and consumer discretionary.

MSCI Nigeria Exchange Traded Fund

The MSCI Nigeria ETF aims to provide exposure to the broader market growth seen by the MCSI All Nigeria Select 25/50 Index. The index and the ETF have a high concentration of consumer staples, financials, and materials.

It might behoove you to investigate several Africa ETFs to see if they are a good fit for your portfolio if Africa is where you want to go. Some funds may seem appealing, but you should still do your homework before investing.

Mutual Funds

Mutual funds are investment vehicles that pool investor capital to purchase a wide range of assets, typically focusing on a particular industry or geographic location. Many such funds allocate their resources to the developing world, while others focus solely on Africa or certain nations within the continent. Here are a few prominent instances:

Africa and Middle East Fund by T. Rowe Price

This fund, known by its initials TRAMX, primarily invests in financial institutions and corporations in Africa and the Middle East, with a few exceptions from Europe. Almost a quarter of their holdings are in that African country. On average, the portfolio returned 10.41% annually for the five years ending in March 2022.

The Commonwealth African Development Fund

The Africa Fund(CAFRX) debuted in 2011 and is one of five mutual funds managed by the Commonwealth International Series Trust. Specifically, it puts its money into the stocks and bonds of African corporations engaged in mining and producing goods. The average quarterly return for CAFRX in the five years before March 2022 was 4.22%.

ADRs

Investors in the United States can trade some equities from Africa using American depositary receipts. For U.S. investors, these securities are how they can trade African stocks on a U.S. stock exchange, as they reflect shares in a foreign-registered corporation.

Moreover, MiX Telematics (MIXT) operates as a logistics technology company. Over-the-counter (OTC) or "Pink Sheets" trading provides access to a broader range of African equities.

Is It Safe To Invest In Africa's Real Estate?

Although investors have mostly ignored real estate in Africa, there are signs that some markets may have room for significant expansion. Demand is expected to rise due to demographic tendencies and rapid population expansion, particularly in cities well-suited to technological and industrial advancement.

IPE Real Estate Magazine reports that in the five years leading up to 2018, investors in Kenya's real estate market saw returns of 25-30%, an incredible number given the higher risks and expenses associated with investing on the African continent.

The Conclusion

Despite the continent's slow progress toward independence after centuries of colonial rule, several African nations have emerged as global economic players in their own right. In response to rising demand from the burgeoning middle class, many locally based businesses have emerged to meet consumer demand.