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.

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

Maybe it’s time to consider taxing the family home

Australia could unlock smarter investment and greater equity by reforming housing tax concessions. Rethinking exemptions on the family home could benefit most Australians, especially renters and owners of modest homes.

Supercharging the ‘4% rule’ to ensure a richer retirement

The creator of the 4% rule for retirement withdrawals, Bill Bengen, has written a new book outlining fresh strategies to outlive your money, including holding fewer stocks in early retirement before increasing allocations.

Simple maths says the AI investment boom ends badly

This AI cycle feels less like a revolution and more like a rerun. Just like fibre in 2000, shale in 2014, and cannabis in 2019, the technology or product is real but the capital cycle will be brutal. Investors beware.

Why we should follow Canada and cut migration

An explosion in low-skilled migration to Australia has depressed wages, killed productivity, and cut rental vacancy rates to near decades-lows. It’s time both sides of politics addressed the issue.

Are franking credits worth pursuing?

Are franking credits factored into share prices? The data suggests they're probably not, and there are certain types of stocks that offer higher franking credits as well as the prospect for higher returns.

Are LICs licked?

LICs are continuing to struggle with large discounts and frustrated investors are wondering whether it’s worth holding onto them. This explains why the next 6-12 months will be make or break for many LICs.

Latest Updates

A nation of landlords and fund managers

Super and housing dwarf every other asset class in Australia, and they’ve both become too big to fail. Can they continue to grow at current rates, and if so, what are the implications for the economy, work and markets?

Economy

The hidden property empire of Australia’s politicians

With rising home prices and falling affordability, political leaders preach reform. But asset disclosures show many are heavily invested in property - raising doubts about whose interests housing policy really protects.

Retirement

Retiring debt-free may not be the best strategy

Retiring with debt may have advantages. Maintaining a mortgage on the family home can provide a line of credit in retirement for flexibility, extra income, and a DIY reverse mortgage strategy.

Shares

Why the ASX is losing Its best companies

The ASX is shrinking not by accident, but by design. A governance model that rewards detachment over ownership is driving capital into private hands and weakening public markets.

Investment strategies

3 reasons the party in big tech stocks may be over

The AI boom has sparked investor euphoria, but under the surface, US big tech is showing cracks - slowing growth, surging capex, and fading dominance signal it's time to question conventional tech optimism.

Investment strategies

Resilience is the new alpha

Trade is now a strategic weapon, reshaping the investment landscape. In this environment, resilient companies - those capable of absorbing shocks and defending margins - are best positioned to outperform.

Shares

The DNA of long-term compounding machines

The next generation of wealth creation is likely to emerge from founder influenced firms that combine scalable models with long-term alignment. Four signs can alert investors to these companies before the crowds.

Sponsors

Alliances

© 2025 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.