Van Eck launched a new ETF in July 2008 named Market Vectors Africa (AFK), which is indexed to the Dow Jones Africa Titan 50 Index. Starkly different than other funds that typically invest in Africa, which usually only concentrate on one region, such as South Africa, this fund invests in the top 50 companies on the continent.
Currently, the fund is down 4.42% YTD and assets under management are at $5.7million, with an average approximate daily trading volume of 5,300 shares.
Unfortunately, political, economic and social ills plague this continent. Combining those ills with the looming events of the US Credit Crisis and Presidential election has many investors sitting on the sidelines hiding in cash. These circumstances have hindered any thoughts of looking at “Exotic” or “Frontier Investments”, which is why this fund has not taken off. Not to mention the bad press that Africa continuously receives due to the political unrest especially in places like Zimbabwe, with the likes of Robert Mugabe and so-called Nigerian corruption scandals.
After examining some fundamentals surrounding this region, you will find vast natural resources, especially oil, natural gas, coal, gold, diamonds and cooper. Secondly, there are a number of investors flush with capital, from India, China and the United States. Thirdly, the air of entrepreneurism is beginning to spread and accelerate throughout the entire area of sub-Saharan Africa.
AFK has the capabilities to take advantage of all the potential gains available in Africa, and is also exposed to all the downside risk associated with a politically volatile region. Presently, this fund has regional exposure in South Africa, Egypt, Nigeria, Morocco and Kenya, and industry exposure mainly in banking, basic resources, oil and gas, telecommunication, and technology.
Even though this fund sports a hefty management fee of 1.2%, it would be well served as a small percentage of someone's long term investment strategy.
Anytime that you have immense natural resources, an extensive inflow of capital, and organized entrepreneurs, you have the makings for a vibrant economy; and when the sea rises, all boats rise.