Most active share ETFs have trailed a plain index fund. Of the nine active Australian share ETFs with a five-year record, none beat A200. Of 15 active global share ETFs, only two beat VGS. Fees explain much of the gap: the median active ETF charges 0.70% a year, against 0.04% to 0.18% for the big index funds. Bonds are the exception, where active funds have mostly come out ahead.
Active and passive, in plain English
A passive or index ETF simply buys every company in an index, such as the ASX 200, in proportion to its size. Nobody decides which shares look good. That keeps costs very low.
An active ETF has a fund manager, or a team, choosing which shares to buy and sell, aiming to beat the market. You pay for that skill through a higher fee, whether or not it pays off.
Active ETFs are now a big part of the market. At 30 September 2026 there were 156 of them, managing $65.5 billion, about 17% of all ETF money in Australia.
How we tested it
We took every ETF with "Active" in its official name and compared its total return, including distributions, with a cheap, popular index fund in the same broad category: A200 for Australian shares, VGS for global shares and VAF for Australian bonds. All returns are to 30 September 2026 and cumulative over each period.
Two caveats keep this honest. Many active funds aim at a narrower slice of the market, such as small companies, value shares or emerging markets, so the index fund is a yardstick rather than each manager's own benchmark. And funds that have already closed are not in the data, which tends to make active results look better than they really were.
The scorecard
Share of active ETFs that beat a cheap index fund
The pattern is clear. Over one year, a fair number of active funds get lucky or catch a trend. The longer the period, the fewer stay ahead. In Australian shares, not a single active ETF with a three or five-year record has beaten A200.
The median active ETF vs the index fund
Over five years, the typical active global share ETF returned about half what VGS did. On $100,000 that is roughly $138,000 vs $175,000. These figures match the long-running pattern in S&P's SPIVA scorecards, which have found for many years that most active managers in Australia and overseas trail their benchmark over long periods.
Why active funds struggle
- Fees start the race behind. A fund charging 0.70% has to beat the market by 0.70% every year just to match an index fund charging close to nothing.
- Markets are hard to outguess. Share prices already reflect what thousands of professional investors know, so finding mispriced shares consistently is difficult.
- A few big winners drive markets. Recent global returns have come heavily from a handful of giant technology companies. A manager who held less of them fell behind.
- Trading costs. Active funds buy and sell more often, and those costs come out of returns on top of the fee.
What fees cost on $100,000 over 20 years
Winners exist, but they are hard to spot in advance
Some active funds have done very well. LPGD (Loftus Peak Global Disruption) returned 120.8% over five years, well ahead of VGS at 74.6%, and VVLU, Vanguard's active global value fund, edged past VGS with 76.0%. The problem is consistency.
Hyperion Global Growth (HYGG) minus VGS
HYGG is one of the largest active ETFs at $3.4 billion. Over three years it beat VGS by almost 13 percentage points. Over one year it lost 5.9% while VGS gained 10.1%, and over five years it trailed by more than 21 points. Investors who bought after a great run often got the weaker years.
The exception: bonds
Bonds tell a different story. All six active Australian bond ETFs with a three-year record beat VAF, and all five with a five-year record did too. Funds such as HBRD returned 21.6% over five years, while VAF was slightly negative.
Part of the reason is structural: bond markets are less efficient, and an index of government bonds can be beaten by owning other kinds of debt. Part of it is risk. Many active bond funds hold floating-rate notes, bank hybrids or corporate credit, which did well while interest rates rose but carry more credit risk than government bonds. Their outperformance is real, but it is not free. See our guide to bond and fixed income ETFs.
When an active ETF can make sense
- In less efficient markets, such as bonds, credit, small companies or some emerging markets, where skilled managers have more room to add value.
- As a small satellite, around a low-cost index core, if you believe in a manager's approach and accept it may lag for years.
- Low-cost systematic funds, such as Dimensional's DACE at 0.28% or Macquarie's MQAE at 0.03%, which sit between index and fully active funds. Both are too new for a five-year record.
For most investors, especially those drawing an income in retirement, a low-cost index core is the simplest way to avoid paying for underperformance. Compare a popular pair yourself, such as VAS vs AASF or VGS vs V1AC, or browse every active ETF.
Compare VGS with two active funds →
Common questions
Do active ETFs beat index funds?
Usually not over the long term. To 30 September 2026, none of the nine active Australian share ETFs with five years of history beat A200, and only two of 15 active global share ETFs beat VGS.
Why are active ETFs more expensive?
You pay for a team of analysts and portfolio managers, plus more trading. The median active ETF charges 0.70% a year, compared with 0.04% for A200 and 0.18% for VGS.
Are active bond ETFs worth it?
They have a better record than active share funds. All six active Australian bond ETFs with three years of data beat VAF. Many hold riskier corporate or bank debt, though, so compare the risk as well as the return.
What is the difference between active and passive ETFs?
A passive ETF follows an index and holds every company in it. An active ETF has a manager choosing investments to try to beat the market, usually at a higher fee.
Joshua Stega is a financial adviser with 20 years' experience and the founder of ETF Adviser. He built ReviewETF to make every Australian ETF easy to find and compare.
General information only. It does not take into account your objectives, financial situation or needs. Consider the PDS and TMD before investing. Past performance is not a reliable indicator of future performance. Data as at 30 September 2026.