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22 Nov 2023
More Australian investors are turning toward exchange traded funds (ETFs), with almost two million now owning at least one ETF as part of their portfolio.1 ETFs have broad appeal, because they can provide diversified exposure to a wide range of companies, regions, asset classes and strategies – in a single trade. This potential for diversification makes them popular with high value investors, SMSFs, young investors and first-time investors.
As the name suggests, active ETFs are actively managed investments. These listed funds have a professional team of managers making decisions to meet a particular investment objective, such as outperforming a set benchmark or investing in specific asset classes, factors or themes.
Active ETF investment decisions can relate to asset or sector allocations, or the timing of trades. For example, the Macquarie’s Fixed Income team discuss portfolio changes on a daily basis. The team aims to preserve liquidity or manage downside risks by proactively seeking to anticipate the impact of market shifts and analysing leading economic indicators, with the overall aim to preserve liquidity or mitigate downside risks.
Most ETFs in Australia are passive ETFs that don’t try to outperform the market and will try to replicate a certain index, such as the ASX200. The value of a passive ETF generally goes up or down with the index or asset it’s tracking for a like-for-like return.
Both active and passive ETFs can play a part in your portfolio. Both can provide exposure to a broad range of asset classes, sectors and global markets, and help diversify and balance your portfolio in line with your investment strategy and goals. Passive ETFs generally give you low-cost access to index performance, while active ETFs will usually charge higher management fees for that specialist investment expertise.
Active ETFs are already a fast-growing share of the US investment market, comprising 5% of overall ETF assets under management and are already outpacing funds flowing to unlisted managed funds.2 And while they are still relatively small in Australia, they are expected to see significant demand in the next two to three years.3
Why? Active ETFs provide access to the same strategies traditional unlisted managed funds use to outperform the market or achieve better returns. However, like shares, they are bought and sold on an exchange, such as the ASX, through a stockbroker or online brokerage account. Active ETFs have the added advantage of greater transparency over the underlying holdings than traditional unlisted managed funds. They also have greater visibility of the buy/sell price in relative real time via the exchange publishing the market price of the active ETF throughout the trading day.
For example, Macquarie’s Walter Scott Global Equity Fund (previously only available as an unlisted managed fund) is now also available as an active ETF through Macquarie, giving you everyday access to the investment strategy. It makes it even more simple to include global companies with long-term growth potential in your portfolio.
Learn more about the differences between active ETFs and traditional unlisted managed funds here.
When evaluating an active ETF, there are few things to consider:
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.
Learn more about how to buy and sell active ETFs.
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.
The Macquarie Walter Scott Global Equity Active ETF (Managed Fund) is a separate class of units in the Walter Scott Global Equity Fund ARSN 112 828 136. A separate class of units is not a separate managed investment scheme.
The Macquarie Walter Scott Global Equity Active ETF (Managed Fund) is designed for consumers who are seeking capital growth and income distribution; are intending to use the Fund as a core component, minor allocation or satellite allocation within a portfolio; have a minimum investment timeframe of seven years; have a high or very high risk/return profile for that portion of their investment portfolio, and require the ability to have access to capital within one week of request.
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.
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.
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