Emerging markets investing has had an overall positive year in 2025. Entering the year, with many U.S. investors underweight foreign equities, some market watchers anticipated big opportunities abroad. With lower interest rates and a declining dollar, emerging markets offered some notable upside. Especially since the initial Liberation Day tariff shock has subsided and the dollar has fallen so precipitously, emerging markets are offering some real appeal.
Within the emerging markets story in 2025, however, is a potentially even more intriguing subplot: the strong performance of Africa equities. On a regional basis, Africa equities have crushed other emerging markets regions on a YTD basis. By looking at the top performing regional emerging markets ETFs YTD, we can get a sense of each.
Seeking Alpha, for example, presents the iShares MSCI Emerging Markets ex China ETF (EMXC ), as representative of the emerging markets ex-China category. EMXC has returned 24.7% YTD for a 25 basis points (bps) fee. The iShares Core MSCI Emerging Markets ETF (IEMG ) offers broad emerging markets exposure and has returned 29.4% YTD for a nine bps fee.
The VanEck Africa Index ETF (AFK ), by contrast, has returned 57.5% YTD for its 88 bps fee. That doesn’t just rely on a big spike from earlier this year, either. The fund has outperformed both IEMG and EMXC over the last three months, as well as YTD, per ETF Database data.
What has driven that performance for AFK and for Africa equities writ large this year? The huge returns for gold and other precious metals can’t be ignored. AFK invests in Barrick Mining Corp., which has returned an eye-watering 111.65% YTD for gold and copper mining in Cote D’Ivoire, Mali, Tanzania, and other African nations. Endeavour Mining Plc has returned an even more robust 127% YTD, with mining operations in nations like Senegal and Burkina Faso.
Mining, while the key driver for the ETF, has not been the sole performance driver. The Africa ETF has also benefitted from a 73.3% YTD return for Naspers Ltd., a South African internet, tech, and multimedia company.
What, then, is the real story for the fund and Africa equities this year writ large? Per ETF Database, the fund does have nearly a third of its allocation in “non-energy minerals.” However, financials, communications, and technology make up the majority of its allocations.
Looking ahead, copper supplies are set to dwindle, boosting prices as demand for that key mineral continues to rise. Gold, too, can continue to see prices and demand rise in a seriously uncertain geopolitical picture.
Further growth for non-mineral companies, however, are in line with record foreign investment in 2024. That investment surged by 75% to an all-time high of $97 billion, bolstered by liberalization per U.N. Trade & Development. Chinese investment continues to diversify into other areas like pharmaceuticals and food, with Egypt receiving much of the $97 billion. Climate-related investments also present a different avenue for growth in African economies, too.
AFK is just one of a handful of Africa ETFs presenting an opportunity for new ETF development in the future. For now, investors interested in diversifying into strong emerging markets performance may want to lock in on African equities.
The continent’s sheer size offers a diverse and growing set of potential investments. Chinese equities face continued government risk and India equities may struggle to meet their lofty expectations. Meanwhile, Africa equities can provide an exciting alternative within the category, building off of that strong YTD performance.
Originally published by Advisor Perspectives
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