"As a whole the continent has become more stable politically and democracy has been adopted by many countries. Africa is rich in resources, which has been attractive to many investors, especially the Chinese," Rowan Dartington’s Tim Cockerill explained.
Paul Collier, director for the Centre for the Study of African Economies at the University of Oxford says this has led to a pickup in inward investment, much of which is going into infrastructure.
"High income from resources is spilling over into the construction sector, which purveys the rest of the economy. The region now isn’t just a straight commodity play like the Middle East," he said.
Collier points to the growth of Rwanda and Uganda, which aren't traditionally resource-rich countries, but have seen good growth, as examples. He also says there has been an improvement in the macro-economic growth of the whole continent, which showed in the global crisis of 2008.
"The fact the region survived the 2008 crisis was testimony to how well African countries’ economic management has been – it’s certainly better than in the US," he continued.
Cockerill says that the number of quoted companies on African stock exchanges has grown significantly in the past 10 years, albeit for those prepared to take on significant risk.
Performance of indices over 10-yrs
Source: FE Analytics
Our data shows the MSCI EFM Africa index, which includes Egypt, Kenya and Nigeria in its remit, returning around 40 per cent more than its emerging market equivalents over the past decade. In contrast, the FTSE 100 returned 53.4 per cent.
FE Analytics data shows there are five open-ended funds with an Africa focus; Fidelity Emerging Europe Middle East and Africa, Investec Africa & Middle East, JPM Africa Equity, Neptune Africa and CF JM Finn Africa. The former three have a three-year track record, while the latter two launched last year.
"The Fidelity Emerging Europe Middle East and Africa has one of the best records but exposure to Africa ex South Africa is just 5.9 per cent, and that includes the Middle East, which perhaps highlights the actual opportunities at the moment,” Cockerill pointed out.
Just one closed-ended fund has more than 50 per cent invested in the region: Independently Managed Africa Opportunity.
The $31.7m investment trust, run by Francis Daniels and Robert Knapp, has an FE Risk Score of just 66, making it less volatile than the FTSE 100. It has a slightly longer track record than the OEICs, having been launched in July 2007. The fund has only returned 3 per cent since launch, though, having lost more than 60 per cent in the 2008 market crash and only just recovering.
In a recent note, the managers blamed their performance fall on currency movements.
"Approximately 40 per cent of losses [in the third quarter this year] arose from currency movements against the US dollar, with two-thirds of those currency losses coming from two currencies: the Euro and its African peg, the CFA Franc, and the rand,” Daniels and Knapp said in a recent note.
Cockerill warned that African-focused funds have yet to prove themselves in the UK market.
"There are hardly any pure African funds and the returns are not that impressive. Many have a very short history and those with a long one have been similar to the MSCI EM index," he said.
He highlighted the Lyxor Pan Africa ETF as one of the best methods of gaining exposure.