Foreign equities investing is hot this year, and it’s clear to see why. U.S. equities face myriad challenges calling for diversification abroad. Earlier this year, specifically, tariff turbulence drove flows into foreign stocks at a high clip. Those challenges have not gone away, and other risks like persistent inflation and concentration risk continue to loom. Amid those challenges, one surprising foreign equities ETF has led its category, per ETF Database.
Which ETF has topped ETF Database’s foreign large-cap equities ETF category YTD? None other than the VanEck Africa Index ETF (AFK), returning 37.88% since January 1. That also comes as the fund has returned 43.35% over the last one-year period, as well. Not only did the YTD performance beat the entire category as of August 6, it also beat its ETF Database Category in that time at 19.8%.
That strong return represents a notable spike compared to its longer-term performance. Over the last five years, the fund returned 7.5%, trailing its ETF Database Category average in that time. What, then, has helped the foreign equities ETF spike so dramatically this year after middling performance historically?
AFK, which charges an 88 basis point fee, tracks the MVIS GDP Africa index. In doing so, it heavily weights key African markets like South Africa, Nigeria, Morocco, and Egypt. While some of its other stocks are based outside Africa, those firms operate primarily in African nations and economies.
That has led the ETF to invest in strong performers like Barrick Mining Corp. (B). The mining company focuses on gold and copper extraction and has returned more than 40% YTD. That may owe to expectations that certain resources like copper may rise in price amid global inflation. What’s more, a focus on gold certainly may prove profitable as interest in the precious metal rises during periods of market instability.
The foreign equities ETF’s largest holding, Naspers Ltd. (NPSNY), is a South African multinational company focused on internet, tech, and multimedia services and products. That firm captures the economic growth and dynamism in a key African economy, with the stock returning 44.6% YTD. Looking ahead, AFK could stand out yet more as a foreign equities ETF diversifier, especially compared to other oversaturated categories therein.
