Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 255

How do Active ETFs and managed funds differ?

Active Exchange Traded Funds (Active ETFs) and managed funds share many similarities, but there are important differences. With a rise in the popularity of ETFs and the introduction of more Active ETFs, the differences between the two actively managed investment options are important considerations for investors.

The similarities between Active ETFs and managed funds include:

  • Active management: The investment manager is attempting to beat an index or benchmark.
  • Open-ended nature creates liquidity (the ease of buying and selling): The fund regularly creates and redeems units, typically daily, depending on supply and demand.
  • Diversification: Investors receive a portfolio of securities in one investment.
  • Regulated trust structure: They are both subject to the same regulatory protections.
  • Limited disclosure: Active ETFs disclose portfolio holdings quarterly while managed funds are not required to disclose, but usually provide top 10 holdings.

Investing in a managed fund

Managed funds are not bought like shares on the stock exchange and investors only know their entry or exit price on a T+1 basis (T+1 means settlement occurs the next day. A unit bought on Monday would settle on Tuesday). The two main ways to invest in a managed funds are:

  • Via a platform (also known as a ‘wrap’), which generally requires investors to pay a platform administration fee.
  • Direct with the fund, which requires investors to fill out forms directly with the fund manager to buy and sell units.

Investing in an Active ETF

Active ETFs, however, are traded on the stock exchange:

  • Units can be bought and sold like shares using a broker.
  • Investors can trade at live prices during the day.
  • Units generally trade at a tight spread around the Active ETF’s net asset value (NAV).

Exchange trading creates a number of benefits:

  • Ease of use: Active ETFs do not require time-consuming forms to buy units (although for some managed funds and through some brokers, ASX’s mFund service usually reduces this workload).
  • Portfolio management: Active ETF units are held alongside shares and ETFs in a broker account making record keeping and tax time easier. Dividends and income are also paid into the same account as shares and ETFs.
  • Generally lower cost: While investors pay a brokerage fee to buy Active ETFs, they avoid platform administration fees and higher fees often charged when investing in managed funds.

However, there are risks that need to be considered:

  • Liquidity: Although the units are quoted on the AQUA market of the ASX, there can be no assurance that there will be a liquid market for units, and no assurance that there will be a liquid market for the fund’s underlying investments. In certain circumstances, the ASX may even suspend trading of an Active ETF.
  • ASX trading price: The trading price of units on the ASX may differ from the NAV per unit and the indicative NAV (iNAV).
  • Market making: As the responsible entity intends to act as a market maker in the units on behalf of the Active ETF, the fund bears the cost and risk of these market-making activities.

When making any investment decision, it pays to explore the alternative features.

 

Paul Gambale is a Product Director at AMP Capital, a sponsor of Cuffelinks. This article is general information and does not consider the circumstances of any investor.

 

  •   23 May 2018
  • 3
  •      
  •   

RELATED ARTICLES

Four ways to invest in the same fund and save money

Active ETFs are a great Aussie invention

Active or passive ETFs: how do you decide?

banner

Most viewed in recent weeks

Noel Whittaker’s take on the budget

Marketed as a fix for inequality and housing affordability, the latest budget instead delivers a tangle of tax changes that leave everyday Australians worse off.

Australia has no death duties. Technically.

Australia may not levy formal death duties, but a growing web of tax measures is quietly shaping what wealth passes between generations. Now, the 2026 budget adds another layer.

Welcome to Firstlinks Edition 662 with weekend update

The debate over the budget is increasingly shaped by frustration and perceptions of unfairness, rather than clear-eyed assessment of policy outcomes.

How to minimise tax with a will

Inheritance tax implications in Australia may surprise some, as poor estate planning without proper wills or trusts can lead to costly tax bills and delays for beneficiaries.

How inflation is quietly moving the goalposts on retirement

Inflation doesn’t just raise today’s bills - it quietly increases the amount needed to retire, while simultaneously making it harder to save. Three steps to take before June 30th to improve retirement outcomes.

Back to the future - Why indexing CGT is a good idea

A return to indexation of capital gains would be a fairer way to compensate households for the effects of inflation than the current discount. Importantly, it opens the door to future, broader reforms to stop the taxation of inflation.

Latest Updates

Investment strategies

High quality businesses are on sale

Beneath the dominance of the ASX's largest stocks, much of the market has been left behind. High-quality companies are now trading at levels rarely seen, offering opportunities for investors willing to look deeper.

Investment strategies

The whirlwind is upon us

Something unusual is happening in markets. The winners are pulling further ahead at an extraordinary pace. As return dispersion hits extreme levels, volatility is rising and the investing landscape is becoming harder to navigate.

Strategy

Inequality destabilises economies

Extreme wealth concentration is no longer just a side effect of growth. As inequality deepens, its consequences are shifting from a social concern to a broader threat to economic stability and democratic resilience.

Investment strategies

Have AI’s four horsemen arrived?

AI exuberance is colliding with economic reality. Cracks are emerging as spending surges, ROI remains uncertain and enterprise behaviour shifts. The next phase may look less like an expansion and more like a reckoning.

Taxation

Budget tax changes only scratch the surface. Here are 4 reforms Australia needs next

The 2026 budget has reignited Australia’s tax reform debate, but more work remains. Beneath the surface lies a harder question: what structural reforms are needed to make the country's tax system fit for the future?

Taxation

Negative gearing: quarantined, not killed

The Budget's negative gearing changes defer deductions rather than deny them, yet a worked example shows quarantining can halve the tax benefit's present value for buyers of established dwellings.

Investment strategies

Family offices have quietly taken over Australian private capital

In just four years, Australia's private capital landscape has transformed. We are seeing changes across who deploys capital, how deals are structured and why new platforms and investor pathways are rapidly emerging.

Sponsors

Alliances

© 2026 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.