How Do Leveraged (Geared) ETFs Work in Australia? A Clear Guide for 2026

Leveraged ETFs — often called geared ETFs or geared funds on the ASX — let you amplify your exposure to the sharemarket without borrowing money yourself. They’re popular with experienced Aussie investors who want bigger potential returns in the right conditions, but they’re not for everyone.

Here’s exactly how they work, using real ASX examples, and when they help… or hurt.

📝How Leveraged/Geared ETFs Actually Work

Australian geared ETFs (find a complete list here) use internal gearing:

This means that the geared ETF you invest in, already has an inbuilt level of borrowing included, so that means $1 invested, could give you $2 worth of exposure to the underlying investments with 50% being your equity, and 50% being borrowed money managed within the ETF structure. This would equate to a 2x exposure.

You can find the current leverage level on the ETF providers website.

Here GHHF is indicating a gearing multiple of 1.53x. So $1 invested would give you $1.53 exposure to the underlying investments (once gearing is included).

As the gearing is managed internally in the ETF structure, there are no margin calls for you. You can only ever lose your original investment

Australian geared funds target a gearing ratio (debt as % of total assets) and rebalance when they drift outside set bands.

Some Real Gearing Levels on the ASX (March 2026)

📝 Additional Costs vs Unleveraged ETFs

In addition you have to factor in the higher management costs, versus an unlevered etf.

The management fee is charged on the total fund under management in the ETF, so that includes equity and debt.

There is also an interest cost associated with the borrowed funds, which is paid by the fund. If interest rates continue to rise, this can be an added drag on returns.

📝 When Leveraged ETFs Are Great (The “Good” Times)

• You have a high-conviction, short-term directional view (weeks to a few months).

• The market is in a clear, low-volatility uptrend.

• You’re an experienced trader who monitors positions actively.

• You want to boost returns in a bull market without using a margin loan yourself.

📝 When Leveraged ETFs Are Dangerous (The “Bad” Times)

• You are looking for short term gains and don’t understand the risks.

• Markets are choppy or sideways.

• Interest rates are high (borrowing costs inside the fund rise) and the market is flat.

• You’re risk-averse or new to investing.

In big crashes, losses are magnified — a 10% market drop can feel like 20%+ in a 2× geared fund.

📝 Can I Hold Geared ETFs Long Term?

You can potentially hold a leveraged ETF for the long term, however you must be prepared for the heightened levels of volatility.

➡️ Bottom Line for Australian Investors in 2026

Leveraged/geared ETFs are powerful tactical tools — not core long-term holdings for most people.

Best use: Small “satellite” allocation (5–15% of portfolio) for short-term conviction trades in strong trending markets.

Not suitable as: Your main retirement portfolio or set-and-forget investment, unless you have a long term investment horizon 10-15 years+.

Always check the latest gearing ratio on the fund’s page and understand the risks.

Want to compare all the geared options on the ASX side-by-side (fees, current gearing, performance, holdings)? Head to reviewetf.com.au — we make it simple and independent. Click here for a complete list of geared ETFs

Important: This is general information only. Leveraged products are very high risk. Consider your own circumstances and speak to a licensed adviser before investing.