Africa exchange-traded funds (ETFs) provide exposure to companies based in Africa. Africa ETFs may provide diversified exposure to many countries and industries throughout in the continent, or they may provide specialized exposure to a specific region or country in Africa.

Like most ETF investments, there are many risks inherent to Africa ETFs, including foreign investment risk, equity risk, emerging markets risk, geographic risk, political risk, frontier market risk and concentration risk. Due to Africa's fast-growing economy, these ETFs provide high-risk, high-reward investments in Africa's economy, and a bet on Africa's economic transformation over the long-term investment horizon. These ETFs attempt to provide exposure by investing companies included in their respective underlying indexes.

Market Vectors Africa Index ETF

Issued in July 2008 by Van Eck, the Market Vectors Africa Index ETF (NYSEARCA: AFK) tracks the Market Vectors GDP Africa Index. Van Eck Associates Corporation, the fund's advisor, charges a relatively high expense ratio of 0.8%, in comparison to the average expense ratio of miscellaneous region of 0.58%. AFK uses an indexing strategy to provide investment results corresponding to its underlying index. It generally invests at least 80% of its total net assets in securities comprising its benchmark index, and it seeks to replicate the characteristics of this index.

The Market Vectors GDP Africa Index includes local listings of companies in Africa, as well as offshore listing of companies incorporated outside of Africa that generate at least 50% of their revenues in Africa. The index's country weighting is based on relative gross domestic products (GDPs) rather than market capitalizations.

Since AFK weights its country exposure based on GDP, it is overweight in more developed countries, such as South Africa, Egypt, Nigeria and Morocco. AFK is also exposed to companies incorporated in the United Kingdom, France and Netherlands. As of July 31, 2015, AFK invests 22.9% of its portfolio in South Africa, 21% in Egypt, 15.3% in Nigeria and 7.6% in Morocco. AFK invests over 10% of its portfolio in the U.K., France and Netherlands, collectively.

Based on trailing three-year statistics, AFK has a beta (against the S&P 500 Index) of 0.72, a low-to-moderate correlation of 0.41 to the S&P 500 Index, a standard deviation of 14.9% and a Sharpe ratio of -0.25. Based on modern portfolio theory (MPT), AFK is best suited for investors with a high risk tolerances who seek exposure to companies located in Africa and companies that generate the majority of their revenues from the continent. Due to its high volatility, low correlation and moderate beta, ATK helps to diversify highly risk tolerant investors' U.S. equity portfolios.

iShares MSCI South Africa ETF

The iShares MSCI South Africa ETF (NYSEARCA: EZA) was issued on Feb. 3, 2003 by BlackRock. EZA is managed by BlackRock Fund Advisors and charges a net expense ratio of 0.62%. As of Aug. 28, 2015, EZA has 55 holdings and total net assets of $356.23 million. The fund seeks to provide investment results corresponding to the MSCI South Africa Index. EZA provides exposure to small-, mid- and large-cap companies traded primarily on the Johannesburg Stock Exchange.

To provide these investment results, EZA's advisor implements a representative sampling indexing strategy. The securities included in EZA's portfolio are expected to have similar characteristics to the underlying index. Under normal market conditions, EZA invests at least 95% of its total net assets in securities comprising its underlying index. Under all circumstances, EZA invests at least 90% of its total net assets in these securities.

EZA is heavily weighted towards the financial and consumer discretionary sectors, which amount to 63.03% of its portfolio. Therefore, EZA has a high degree of country risk and sector risk. As of July 31, 2015, EZA has a trailing three-year standard deviation of 17.12%, a beta (against the S&P 500 Index) of 0.21 and an annualized market price return of 12.85% since its inception.

EZA is a high-risk, high-reward investment that is best-suited for long-term investors with high risk tolerances who can stomach the high level of volatility. Additionally, EZA is recommended for investors who have a bullish outlook on South Africa's equity market and seek exposure to publicly traded companies listed on the Johannesburg Stock Exchange.

SPDR S&P Emerging Middle East&Afr ETF

The SPDR S&P Emerging Middle East & Africa ETF (NYSEARCA: GAF) was launched on March 20, 2007 by State Street Global Advisors, and is managed my SSGA Funds Management. GAF charges a competitive net expense ratio of 0.49%, while the average miscellaneous region fund charges a net expense ratio of 0.58%. GAF seeks to provide investment results corresponding to the performance of the S&P Mid-East & Africa BMI Index, GAF's underlying index, by employing a sampling indexing strategy. GAF is not required to purchase all representative securities in the underlying index. Rather, it may purchase a subset of common stocks included in the index, which is expected to have similar characteristics to the underlying index.

GAF's benchmark index is a market-cap weighted index designed to track publicly traded companies on Middle Eastern and African markets. To be included in the index, the companies must be based in countries classified as developed or emerging markets by the S&P Global Equity Index. Additionally, these companies must have float-adjusted market capitalizations of at least $100 million and at least $50 million annual trading are included for each country.

Under normal market conditions, GAF generally invests at least 80% of its total net assets in the securities comprising its underlying index or in American depositary receipts (ADRs) or global depositary receipts (GDRs). As of Aug. 27, 2015, GAF is heavily weighted towards South Africa and invests 76.42% of its portfolio to companies based there, so the ETF carries a significant degree of country risk. GAF also carries a significant degree of sector risk; the fund is allocates 40.06% of its portfolio to the financials sector and 23.15% to the consumer discretionary sector.

As of July 31, 2015, GAF generated an annualized market price return of 3.81% since its inception, and it underperformed its benchmark index by nearly 1%. The fund has an extremely high tracking error of 1.07, which indicates it does a poor job in replicating its benchmark index. Based on trailing five-year data, GAF has an annualized volatility of 19.29%, a Sharpe ratio of 0.26 and a beta (against the standard index, the MSCI ACWI Ex-U.S. NR USD Index) of 0.98. In terms of MPT, GAF is best-suited for long-term growth investors with a high risk tolerance who seek to be overweight in companies located in South Africa, and the financials and consumer discretionary sectors.