The trend towards dual access funds that allow advisers to choose either a listed or unlisted version of a product begs the question: which avenue is the best option for a client?

Global fund managers such as Dimensional Fund Advisors and Franklin Templeton are among those to launch ETF versions of unlisted funds in 2024, alongside local managers like Nanuk Asset Management.

Dimensional offers six dual access funds in Australia after extending its ETF range to include the Dimensional Australian Value Trust (ASX: DAVA), the Dimensional Global Value Trust (ASX: DGVA) and the Dimensional Global Small Company Trust (ASX: DGSM).

Nanuk Asset Management has two dual access funds after launching the Nanuk New World Fund (Currency Hedged) Active ETF (ASX: NNWH), which is a hedged version of the Nanuk New World Fund (Managed Fund) (ASX: NNUK). Both are also available for direct investment via the fund manager or platforms.

In the fast-growing private debt market, Metrics offers both the listed Metrics Master Income Trust (ASX: MXT) and its unlisted equivalent, the Metrics Direct Income Fund, to retail investors.

The push towards dual access funds reflects the competition that ETFs, in particular, present to asset managers offering unlisted funds. By offering different channels to access the same investment strategy, they are increasing their ability to attract the desired pool of capital.

An adviser’s decision about which avenue to choose is not clear cut – as each investor has different circumstances and objectives that must be considered.

Some key factors that may influence the eventual decision include:

Transaction costs: Brokerage for sharemarket trading can make vehicles like ETFs and listed investment trusts unsuitable for clients who invest small amounts on a regular basis – simply because the cost of each transaction adds up over time. Conversely, clients who intend to invest lump sums may be more suited to a listed product.

Pricing and trading: “ETF pricing and quantity traded is known immediately after trade execution, whereas unlisted managed fund pricing and quantity traded is not known until the following business day. This immediate pricing helps ETFs trade smoothly, especially with rebalance trades not leading to time out of the market for investors,” according to Dimensional. It also notes, however, that advisers need to be mindful of “how they trade [ETFs] to reduce the chance of poor execution and wide spreads for their clients.” By contrast, unlisted managed funds can be traded with a known spread to a fund’s net asset value. 

Transparency: An oft-cited advantage of ETFs is the transparency of holdings: “with an ETF there is also greater transparency around the fund’s underlying holdings, as ETF issuers are required to regularly publish this information on their websites. In contrast, unlisted managed funds are not always required to disclose their portfolio holdings and often only list their top 10 investments,” according to Macquarie Asset Management. Some unlisted active funds do, however, offer transparency of daily holdings – so it’s worth checking if this happens to be a consideration for an adviser and their clients.

Liquidity (for private debt): The timeframe in which investors will require access to capital in a private debt fund can be an important consideration. Listed private debt funds offer daily liquidity but are also exposed to the volatility of the sharemarket. Unlisted funds are not exposed to these ups and downs – but may only allow monthly, or quarterly, redemptions, or redemption via asset run off (as loans in a portfolio are repaid), according to Metrics. 

Of course, it may simply be the case that a client is familiar with a particular fund type due to their own previous experience or that of family and friends. This could be reason enough to choose that channel for investment once all other factors are taken into account.

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