Macquarie Asset Management
Please select your role

  • Current role selection

    Macquarie ETFs - AU ETFs
Macquarie ETFs_How to invest in active ETFs_Blog

How to invest in active ETFs

22 Nov 2023
 

Active ETFs are on the rise as investors seek the convenience of ETFs together with the potential additional benefits of active management. Here’s how you can add active ETFs to your investment portfolio. 

Why invest in active ETFs?

Exchange traded funds (ETFs) allow you to buy a range of assets or even asset classes in a single trade (depending on the ETF), making it easy to access quality investments via an online trading platform or through a broker. They offer a simple way to build a diversified portfolio suited to your goals, risk profile and investment strategy. Most investors who hold ETFs are seeking diversification opportunities, want to maximise their capital growth or secure a sustainable income stream.1

Until recently, most ETFs in Australia were passive – designed to track an index or benchmark. But the demand for active ETFs is growing rapidly2 as investors realise the benefits of easy access to an actively managed investment strategy via a stock exchange. As the name suggests, active ETFs are actively managed by professional investment managers and aim to outperform an index or benchmark.

Active ETFs give you simple, easy access to investment strategies designed to beat the market, without the administration and paperwork often associated with traditional ​unlisted ​managed funds. 

 

What do you need to know about active ETFs before investing?

Because active ETFs are listed on an exchange, such as the Australian Securities Exchange (ASX) or Cboe Australia, there’s a greater level of transparency. Regulators require investment managers to regularly disclose the fund’s underlying securities.

Before investing in an ETF, you should read the Product Disclosure Statement and Target Market Determination for the ETF and consider if the ETF is right for you given your investment objectives, financial situation and needs. Please also seek professional investment and/or tax advice where required before investing.

When evaluating an active ETF, there are few things to consider:

  • What is the experience and track record of the active ETF provider and fund management team?
  • How are securities selected and managed?
  • Does the active ETF invest in assets that align with your investment strategy?
  • What is the total cost of ownership including any management fees and transaction charges?
  • Does the objective and strategy of the active ETF align with your risk tolerance and overall investment goals, financial situation and needs?

You should also check if an active ETF is trading at or around the Net Asset Value (NAV) per unit before you decide to buy (or sell). ETFs publish their NAV per unit daily, based on the value of the underlying assets held in the ETF at the end of the market trading day, minus fees, expenses and other liabilities. For certain active ETF strategies which don’t have their full holdings published every day, Macquarie publishes an indicative Net Asset Value (iNAV) in real time on its website, and updates this approximately every 15 seconds throughout the trading day to provide investors with an estimate of the current NAV per unit for the ETF.3

These two figures – the NAV and the iNAV - will give you an indication of how closely the units in an active ETF are trading to their current underlying value. You can then decide to trade with a limit order (a price you set) or a market order (the ETF market price at the time you trade). Trading with a limit order gives you more price certainty when buying or selling active ETFs.

 

How do you invest in active ETFs?

Buying active ETFs is as easy as buying shares on the ASX. There are typically low investment minimums, depending on the broker or investment platform. 

Once you have a brokerage account, you can usually buy or sell active ETF units at any time during a stock exchange trading day. This can be done through an online broker, full-service broker, financial adviser or investment platform. 

8 steps for buying and selling active ETFs

To execute an active ETF trade:

  1. Choose the broker, financial adviser or investment platform you want to invest through.

  2. Set up a brokerage account and ensure you have enough funds to invest. If your brokerage account is linked to your bank account, your broker will usually automatically facilitate the payment for the trade.

  3. Select the active ETF you have chosen to invest in.

  4. Decide on the number of units or dollar value you want to buy or sell.

  5. Compare the latest market price for the active ETF against the last published NAV per unit (and, if available, the iNAV).

  6. Decide whether you want to set a limit order or market order. A limit order sets a price limit to your trade – you will not buy at a higher price or sell at a lower price. Alternatively, you can use a market order, and buy or sell a specific number of ETF units at the price required to fill the order.

  7. Submit your order to execute the trade. To do this, you’ll need the following details: 
    • ASX code (e.g. ASX: MQIO)
    • Order type (buy or sell)
    • Quantity (number of units or dollar value of trade)
    • Price (at the limit or market order)
    • Expiry date (for limit orders)
       
  8. Once the trade is completed, you will receive a confirmation (also known as a contract note) from your broker or the share registry.

To sell an active ETF, simply follow steps 4 to 8.

Investing in active ETFs for the long term

Investing in active ETFs over time can be an effective way to build long-term wealth with a diversified portfolio. They provide easy access to a wide range of investment strategies that can complement your other assets or fill a gap in your portfolio. 

For example, fixed income active ETFs can potentially provide a defensive anchor for your portfolio, as well as providing the potential for regular income distributed monthly or quarterly. Global equity active ETFs may also suit a long-term strategy – however, active ETF investing should not be ‘set and forget.’ Just like any other type of investment, it’s important to regularly review your active ETF investment strategy and ensure it’s still aligned with your investment goals. 

Learn more about Macquarie’s active ETFs



1 Australian Investor Study 2023, ASX, 2023.
2 ETFs 2027: A world of new possibilities, PwC, 2023.
3 Please note that the iNAV is indicative only. In particular, if there is no live trading price for certain securities held by an ETF during the trading day, the value of those securities for the purposes of calculating the iNAV may only be updated based on the movements of equivalent securities, movements in after-market trading or foreign exchange movements. As a result, the iNAV may not reflect the actual value of the assets of the ETF.

Risks

All investments carry risk. Different investments carry different levels of risk, depending on the investment strategy and the underlying investments. Generally, the higher the potential return of an investment, the greater the risk (including the potential for loss and unit price variability over the short or long term). Find more information on the risks of investing in an ETF in the Product Disclosure Statement for the ETF. This and the Target Market Determination for the ETF should always be considered before deciding to invest in any ETF. 

This information has been prepared by Macquarie Investment Management Australia Limited (ABN 55 092 552 611 AFSL 238321).  The information is provided for general information purposes only and is not, and should not be construed as, an advertisement, an invitation, an offer, a solicitation of an offer or a recommendation to participate in any investment strategy or take any other action, including to buy or sell any product or security or offer any banking or financial service or facility by any member of the Macquarie Group. This document has been prepared without taking into account any person’s objectives, financial situation or needs. Recipients should not construe the contents of this document as financial, investment or other advice. It should not be relied on in making any investment decision. 

Future results are impossible to predict. This document contains opinions, conclusions, estimates and other forward-looking statements which are, by their very nature, subject to various risks and uncertainties. Actual events or results may differ materially, positively or negatively, from those reflected or contemplated in such forward-looking statements.  

Past performance information shown herein, is not a reliable indicator of future performance. 

No representation or warranty, express or implied, is made as to the suitability, accuracy, currency or completeness of the information, opinions and conclusions contained in this document. In preparing this document, reliance has been placed, without independent verification, on the accuracy and completeness of information available from external sources. To the maximum extent permitted by law, no member of the Macquarie Group nor its directors, employees or agents accept any liability for any loss arising from the use of this document, its contents or otherwise arising in connection with it. 

The Target Market Determination (TMD), available at macquarie.com/mam/tmd, includes a description of the class of consumers for whom the Fund is likely to be consistent with their objectives, financial situation and needs.

[MCOL-19896]