Macquarie ETFs_Active ETFs_Frequently asked questions

ETF Frequently Asked Questions (FAQs)

Explore answers to some of the most commonly asked ETF questions

What is an ETF?

An exchange-traded fund (ETF) is an open-end fund that you can trade on an exchange, like the New York Stock Exchange (NYSE), just as you would buy or sell shares of a company. When an investor purchases an ETF, they receive shares in the ETF, gaining access to the underlying assets that the ETF invests in, rather than owning the underlying shares or assets themselves.

ETFs can be actively or passively managed. Passive ETFs typically track the performance of an index, benchmark, sector or commodity. Active ETFs have a strategically selected underlying portfolio that is actively managed by a professional fund manager with the aim of achieving its investment objectives.

What is an active ETF?

Active ETFs are actively managed by an investment manager – typically with the aim of outperforming a market benchmark or achieving a specific investment objective. Active ETFs give investors access to experienced investment management specialists, allowing investors to build portfolios and invest in ways that may be suitable for their individual investment objectives and risk tolerances.

Active ETFs, like all ETFs, are open-end funds, which means that the ETF issuer can create or redeem shares according to investor demand, and investors are generally able to buy and sell these shares on the exchange during each trading day.

What is the difference between passive and active ETFs?

A passive ETF, also known as an index ETF, typically aims to replicate the performance of a specific index. It may be designed to track a standard index, such as the S&P 500^®Index or a custom benchmark tailored to a specific investment theme. The value of a passive ETF typically goes up or down in line with the index it tracks, and, in general, the ETF does not aim to outperform that index.

An active ETF, in contrast, is based on a particular active investment strategy and its underlying investments are chosen by the investment manager in accordance with the strategy. The investment strategy may seek to outperform an index or market sector, or to achieve a certain investment return or risk objective. The investment manager may employ various trading and portfolio management strategies to try to meet the ETF’s investment objective.

Note: The S&P 500 Index measures the performance of 500 mostly large-cap stocks weighted by market value, and is often used to represent performance of the US stock market.

What are the benefits of an ETF structure?

There are several, but you’ll probably hear most often about the following:

Tax efficiency: The ETF vehicle has a natural mechanism that can enhance the tax efficiency of a portfolio. Securities can be redeemed in-kind (i.e. securities are traded for other securities), which allows portfolio managers to remove securities with gains from the portfolio. This does not remove the gains from the portfolio, but instead isolates the gains to investors when they buy and sell at market price.

Liquidity: ETFs can be traded throughout the day when the exchange is open, while mutual funds can be bought or sold only at the end of the day once net asset value (NAV) has been determined.

Lower costs: Generally, the fees associated with ETFs are lower than the fees for mutual funds because ETFs typically have no distribution (e.g. 12b-1) fees and have lower operating fees.

Transparency: Although not all ETFs are transparent, Macquarie ETFs in the US are, and they provide investors with daily disclosure of portfolio holdings.

No transaction fee: Many ETFs can be accessed through platforms with no commission fees.

What drives the market price of an ETF?

The NAV per share for an ETF is published each trading day and is based on the value of the ETF’s underlying assets minus fees and other expenses. Because ETFs offer live pricing on the stock exchange, investors are in control of the price at which they buy and sell. Just like trading shares, you can take the market price with a market order or set your price with a limit order. The latter gives you greater certainty over the price at which you will trade. As ETFs have open-end structures, shares can be created and redeemed based on supply and demand. The true liquidity of an ETF depends on the underlying liquidity of the assets held by the ETF.

As shares may be bought or sold throughout each trading day, the purchase or sell price received on the exchange may differ from the published NAV per unit of the ETF, which is calculated at the end of each trading day.

What is a market maker and an authorized participant?

Market makers are broker/dealers that provide two-sided (that is, buy and sell) quotes to ETF investors on the relevant stock exchange for each trading day. In other words, the market maker’s role is to help facilitate liquidity for shares in the ETF on the exchange.

Authorized participants (APs) are trading participants of an exchange that are permitted under the rules of the exchange to buy and sell units in the ETF on the exchange during the trading day. Only APs may engage in creation or redemption transactions directly with the ETF. The ETF has a limited number of financial institutions that are institutional investors and may act as APs.

What is an ETF premium/discount?

Do active ETFs pay dividends?

Active ETFs may provide investors with a payment of income or capital in the form of a distribution, although, like dividends, these are not guaranteed and will depend on the performance of the ETF. Distributions are paid to investors in a similar way to a dividend that an investor receives in relation to a share in a company. These distributions will vary for each active ETF depending on the type of investment strategy and type of assets held by the active ETF, and they can range in frequency from a monthly payment to an annual payment.

What fees do ETFs charge?

ETFs will typically charge a management fee, and the fees charged by the ETF will be set out in the ETF’s prospectus.

The fees charged by an ETF are set by the ETF issuer and will be different for each ETF, depending on the strategy. The fees are commonly calculated daily and deducted from the assets of the ETF by the issuer and reflected in the NAV per unit share price of the ETF.

When is the best time to buy and sell ETFs?

The price of an ETF is influenced by market forces. If the market is volatile, the ETF price may fluctuate accordingly. Markets tend to be more volatile near their open and close, and this is when spreads generally widen. Prices at the beginning of a trading day are influenced by breaking and overnight news and then tend to normalize.

Based on these trends, the general view is to avoid buying or selling ETFs within the first 30 minutes or during the closing auction at the end of the trading day. In early trading there may be a lower volume of trading activity, in conjunction with economic data news and changes in market sentiment, which can lead to higher market volatility and result in the ETF price not aligning closely with its NAV. The same may be said about trading in the closing auction, when there is a heightened risk of trading an ETF at a price that is at a greater discount or premium to the underlying value of its assets than at other times of the day.

What is the bid-ask spread?

How do I buy and sell active ETFs?

Explore our active ETF platform

Access our growing suite of active ETFs, including equity, fixed income, and real asset investment solutions.

Equity

EMEQ
Macquarie Focused Emerging Markets Equity ETF

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LRGG
Macquarie Focused Large Growth ETF

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Fixed income

HTAX
Macquarie National High-Yield Municipal Bond ETF

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STAX
Macquarie Tax-Free USA Short Term ETF

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Real assets

PWER
Macquarie Energy Transition ETF

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BILD
Macquarie Global Listed Infrastructure ETF

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Still have questions?

For questions on Macquarie ETFs, contact us via the information below.

Email

Macquarie Asset Management
Sales Desk
advisorsolutions@macquarie.com

Telephone

Advisors: 877 693-3546

Investors: 844 469-9911

Investing in any exchange-traded fund involves the risk that you may lose part or all of the money you invest.

Carefully consider the Fund's investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Fund's prospectus or the summary prospectus, which may be obtained by visiting the Macquarie ETF Trust resource pages or calling 844 469-9911. Read the prospectus carefully before investing.

The Macquarie ETF Trust Funds are distributed by Foreside Financial Services, LLC. Foreside Financial Services, LLC is not affiliated with any Macquarie entity, including Macquarie Asset Management and Delaware Distributors, L.P.

All third-party marks cited are the property of their respective owners.

Nothing presented should be construed as a recommendation to purchase or sell any security or follow any investment technique or strategy.

Not FDIC Insured • No Bank Guarantee • May Lose Value

You can check the background of your investment professional on FINRA's BrokerCheck.

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ETF Frequently Asked Questions (FAQs)

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