Africa ETFs are in general micro in size, with high associated costs relative to developed market ETFs. The high costs are associated with the difficulty and expense of managing security holdings across multiple jurisdictions where the liquidity of stock markets is low in comparison to other global markets. In developed markets ETFs have become a mainstay of investment attracting a significant proportion of inward investment flows. However there are a number of reasons why we believe that an active management style, as opposed to a passive investment approach works better, for the time being, within an African context.
Why Buying an Africa ETF may not be your Best Decision
Africa is a complex investment region, comprising 54 countries, with a geographical area the same as North America, Western Europe, India, China and Japan combined. In such a large region with multiple countries a number of issues arise from an investment perspective including:
- Countries experiencing very different economic cycles, e.g. some countries benefit when oil rises (Nigeria), others benefit when oil falls (Ethiopia)
- Repatriation of Foreign Exchange issues are a larger consideration than in developed markets as access to US dollars can be severely impacted during economic downturns in certain Africa countries
- Single country Exchange rates can fluctuate wildly within short periods of time
What are the Alternatives to an African ETF?
There are a few alternatives that you could consider:
- Managing your own brokerage accounts in top performing economies in Africa. The www.invest-in-africa.co website provides more information on how, wheres and why of investing in Africa.
- Adventis is an active fund manager focused on positive impact investments in the listed African equity space, as well as positive impact investments in the Africa income space. Our team has run the largest African equity fund globally, and our income fund is returning double digits in US$ returns annually with no historic defaults. We would be delighted to provide you with more information on our funds (minimum investment $75,000).