• Passive ETFs aim to replicate the performance of a market index (like the ASX 200 or S&P 500). They are not actively managed – the fund simply follows the index, buying and holding the same securities in the same proportions.
•  Active ETFs, by contrast, are managed by professional portfolio managers who make investment decisions based on research, market conditions, and their own judgement. The goal is to outperform a benchmark or deliver a specific investment outcome.

A few benefits of Active ETFs:

• Professional management: Investors gain access to the expertise of experienced fund managers.
• Potential for outperformance: While returns are never guaranteed, active ETFs aim to beat a benchmark, whereas passive index trackers usually aim to simply track the index.
• Flexibility: Managers can respond to market volatility, economic shifts, or emerging trends, whereas passive ETFs are generally designed to track an index regardless of market dynamics.
• Access to niche strategies: Active ETFs can target areas like credit, ESG, or thematic investing that may not be offered as passive products.
• Ability to avoid poor-performing or overvalued stocks: Passive ETFs usually include every stock in their index – even those that are overvalued, declining or facing challenges. In contrast, active managers can choose to exclude certain stocks, reduce exposure to certain sectors or regions and more.

Many active ETFs are exchange-quoted versions of already existing unlisted managed funds. This means they have the same investment strategy, the same team and that the portfolio and its underlying holdings are the same. When this is the case, the only difference is how investors access the fund. 

Unlisted funds often require:

• High minimum investments (e.g. $10,000+)
• Platform access or financial adviser support
• Paper applications 
• Are typically priced once a day, with cut-off times for applications and redemptions often applying.

ETFs remove these barriers so investors can:

• Start with a smaller investment amount
• Trade via their brokerage account (e.g. CommSec, nabtrade)
• Buy and sell units whenever the stock exchange is open.

ETFs trade on the exchange like shares, but their price is kept close to the fund’s Net Asset Value (NAV) through a creation and redemption process. Market makers and an intraday indicative NAV (iNAV) help ensure the trading price reflects the underlying portfolio throughout the day.

Dual-access ETF

Some active ETFs are simply an exchange-quoted class of an existing unlisted managed fund. Same investment team, same strategy, same underlying pool of assets – two ways to enter:

• On-exchange via your brokerage account (ETF units).
• Off-market via platforms/advisers (unlisted units), often with higher minimums and application forms.

Separate listed unit class
A separate unit class of an existing unlisted fund that is quoted on exchange as an ETF. This ETF class feeds into the same underlying pool of assets and therefore the same portfolio as the unlisted unit class

Standalone ETF
An ETF can also mirror an unlisted strategy while operating as an entirely separate vehicle with its own distinct pool of assets. Same investment team and approach – but the ETF and the unlisted fund are structurally independent.

ETF liquidity is not the same as the number of units you see traded on screen. That’s because ETF units can be created and redeemed according to investor demand. This creation and redemption process is carried out by authorised market makers and accesses the liquidity of the underlying holdings – meaning that the primary driver of ETF liquidity is the underlying securities, rather than the trading volume.

Take Hyperion Global Growth Companies Fund – Active ETF (ASX:HYGG) as an example. It is a large-cap global equity ETF holding shares in some of the world’s biggest listed companies. Most of the time, those underlying stocks trade continuously across major exchanges around the world, with billions of dollars changing hands each day. Even if the ETF itself has a day with relatively modest trading volume on the local exchange, that on-screen activity doesn’t reflect the true liquidity available. If a market maker needs to create or redeem units, they can do so with the Fund which then in turn trades the underlying stocks directly – tapping a pool of liquidity that is typically far deeper than either the daily ETF volume or the buy and sell orders visible in the ETF’s order book at any given moment.

ETFs are open-ended structures. Market makers can create and redeem units at will, which keeps the ETF’s market price closely aligned with the value of its underlying assets (known as the net asset value, or NAV).

Listed Investment Companies (LICs) and Listed Investment Trusts (LITs) work differently. They issue a fixed number of shares at IPO and it’s those fixed number of shares (units in the case of an LIT) which are traded by buyers and sellers of those shares on exchange. The number of shares only changes if the company issues new shares or buys shares back.  The share price of a LIC is therefore determined by the price buyers and sellers of the shares are willing to trade at, much like a listed company. The Net Tangible Asset (NTA) value of an LIC or LIT is similar to the NAV of an ETF (it’s the value of the portfolio). This NTA value should drive the share price of a LIC over time. In the short term, however, depending on the (im)balance between buyers and sellers of the LIC, the share price can trade at a premium or discount to its NTA per share.

Why invest in an LIC /LIT?

• Access to specialist strategies. LITs in particular suit less liquid asset classes like private credit, where a closed-end structure is a better fit for the underlying investments.
• Dividend smoothing. Unlike ETFs, LICs can retain income in good years and draw on those reserves to maintain steady dividend payments in leaner periods. This can suit investors who rely on consistent income.

Solaris Australian Equity Income Plus Ltd (ASX:SET) is a good example of a LIC. It is designed to pay monthly franked dividends. Because it’s a LIC, the board has the ability to smooth dividend payments over time to provide these as regular income.

ETF names try to convey issuer, strategy, and features in one line. A typical name will include:

• Issuer or brand (e.g., the manager behind the product).
• Strategy/theme (Australian shares, global quality, credit, etc.).
• Feature flags such as “Hedged” (currency risk managed), “Income” (yield focus), “Complex” (uses derivatives or non-standard exposures), or “Active” (professionally managed, not index-tracking).
• The ticker (the short code you trade on ASX/CBOE).

When you see “Complex ETF”, it usually signals that the fund uses derivatives – such as swaps or futures – or employs a strategy that goes beyond simply buying and holding a basket of stocks. Exchanges apply additional listing requirements to these products to reflect that added complexity.

The Plato Global Alpha Fund Complex ETF (ASX:PGA1) is one example. Rather than just buying stocks it expects to rise, it also takes short positions in stocks it expects to fall. Because it is a long/short strategy, it has the “complex” title.

A fund manager’s website should provide information about the fund’s strategy, investment approach and portfolio holdings. Both ASX and Cboe require regular disclosure and reporting from listed products.

For passive ETFs, portfolio holdings are typically published on a daily basis because the fund is designed to track a known index.

For active ETFs, top holdings are often disclosed on product websites and monthly performance reports. Full portfolio holdings are typically only disclosed on a delayed basis, once a quarter to the exchange. This helps protect the fund manager’s intellectual property and investment process, while still providing investors with regular transparency about the fund’s portfolio. Visit the fund manager’s website for the latest portfolio disclosures and reporting information.

• Product pages: Manager websites provide strategy details, holdings, fees, risks, and any applicable disclosure documents such as the PDS
• Exchange portals (ASX / CBOE): Look for iNAV, holdings disclosures, and trading/market-making information.
• Your broker or adviser: for guidance on order size, execution, and any premium/discount considerations.