Passive ETFs continue to dominate domestic market

The latest analysis from Betashares indicates index ETFs continue to drive the expansion of Australia's ETF industry.

Index ETFs attracted approximately $53.5 billion in net inflows over the past year, compared with around $6.1 billion for active ETFs, Betashares said, indicating monthly adoptions and investments of index ETFs have accelerated significantly over the past decade.

Net flows rose from an average of around $431 million per month in 2015 to approximately $4.5 billion per month in the last 12 months to May end.

Observing the trend, Betashares investment strategist Tom Wickenden said index ETFs are the clear engine room for the sector, continuing to attract new investor money.

"The data shows that while active ETFs are growing, index ETFs are still doing the heavy lifting when it comes to industry expansion," Wickenden said.

"Over the past decade, index ETF flows have increased more than tenfold on a monthly average basis. This reflects the growing role ETFs now play in portfolio construction, as investors and financial advisers increasingly turn to transparent, cost-effective and diversified exposures across asset classes."

He said the growing breadth of index-based investments available is also providing financial advisers more choice in portfolio constructions.

"Investors can now use index ETFs to efficiently capture a wider range of sources of return across asset classes, sectors, factors and long-term megatrends," he added.

"What is particularly notable is the scale of the flow differential. Over the 12 months to May 2026, index ETFs attracted almost nine dollars in every ten dollars of combined active and index ETF net flows. That speaks to the enduring appeal of indexing and the role index ETFs now play as core portfolio building blocks."

While active ETFs have also grown from a small base, index ETFs continue to attract investor seeking low-cost, transparent and diversified exposures.

As at May 2026, index ETF funds under management in Australia stood at approximately $296 billion, compared with around $68 billion for active ETFs, further underscoring the central role index strategies play in Australian investor portfolios.

Moving forward, he believes the industry will continue to flow in the same direction.

"Active ETFs are a growing part of the market, but the broader industry's growth continues to be driven by index strategies. Investors are increasingly using index ETFs to access Australian equities, global equities, fixed income, cash and other asset classes in a simple and efficient way," Wickenden said.