A surge in the number of active exchange traded funds (ETFs) available in Australia appears likely as issuers continue to look for new ways to capitalise on the broader popularity of ETFs among advisers and investors.

Industry giant State Street forecasts that overall net inflows into ETFs listed in Australia will exceed $40 billion in 2026, nudging the total assets under management in the vehicles close to $380 billion.

Its Global 2026 ETF Outlook: From wrappers to backbone, released in April 2026, pointed out that large global investment managers launched active ETF strategies in Australia last year, reflecting demand for “expanding the ETF investment wrapper beyond index-tracking products.” 

It predicts this trend will continue in 2026 and that established managers will also increase adoption of dual access/ETF share class models into their product offerings.

This already appears to be playing out. In April 2026, around 9 active ETFs were admitted to the ASX – ranging from Betashares 2031 Fixed Term Corporate Bond Active ETF (ASX: 31BB) to a trio of VanEck diversified ETFs and Spheria’s Australian Smaller Companies Active ETF (ASX: SPHX). 

That follows the launch earlier in the year of funds like the Ziller Global Fund Active ETF (ASX: ZILR) and the Bell Global Emerging Companies Class A Active ETF (ASX: B1SM). At Cboe Australia, the AB Global Strategic Core Equities Fund – Active ETF (Cboe: SCOR) commenced trading in early April 2026.

“With regard to the active ETF space [in Australia], we will continue to see existing investment managers launching funds with the external market-making model being the popular choice. However, in recent years these strategies have had mixed success,” State Street’s report says.

Other commentators hold similar views to the latter point. Morningstar, for example, argues an active ETF “works best for liquid, scalable, and broadly diversified strategies; niche, illiquid, or complex approaches face friction and higher implicit costs.”

Implications for advisers

The array of ETFs now available locally means advisers must consider more factors when adding them to portfolios, versus the simpler decisions required when passive funds tracking the world’s largest indices were the only options available.

Fees are an obvious initial consideration, given that active investing by definition is an expensive exercise in comparison to its passive counterpart. That extra cost is especially felt when an active fund does not achieve its long-term objective. S&P Global’s respected SPIVA Australia Persistence Scorecard – which includes both open-ended managed funds and ETFs – found that among the top quartile of funds in all reported Australian fund categories over the five-year period ending in December 2020, only 22.4% maintained their top quartile status in the subsequent five year-period. Australian bond funds were the lone exception to this general rule.

Beyond fees, experience and track record of an investment team across market cycles applies as much to due diligence for ETFs as it does for unlisted funds, as does a need for a robust understanding of a fund’s underlying investment strategy.

Watch the spread

But an ETF structure also has specific features that are worth examining prior to investing. Key areas to be aware of include the bid-ask spread, for example, which can be an indicator of market liquidity and, therefore, the implied cost of trading, according to Morningstar.

“Tight spreads often suggest good liquidity and strong support from the ETF sponsor; wide ones often indicate illiquid holdings, low trading volume, or market stress,” Morningstar says.

“ETFs with higher average daily volume (ADV) tend to have tighter bid-ask spreads, but for large ETF trades, implied liquidity is a superior measure of ETF liquidity than ADV. The tradability of an ETF's underlying assets often matters more than its own trading history,” it says.

It then explains that premiums and discounts to NAV can erode returns, and suggests that stable, narrow deviations are preferable to volatile swings – “which indicate weak arbitrage or hard-to-price ETF holdings.”

Active ETFs might still account for a relatively small proportion of local industry flows at just $336 million in April 2026 for active funds compared to $5.06 billion for passive funds, according to Betashares. But the industry’s sharpest minds appear focused on delivering the same innovation to Australia that is reshaping the ETF market globally.

State Street forecasts that 85% of ETFs launched in the US this year will be active. If that transpires and products deliver on their objectives, the same trend may accelerate in Australia and require advisers to apply an additional lens to portfolio construction.

Stay up to date with the latest insights - sign up to the monthly AXIS email newsletter.