Active Trends & APAC Outlook - Discover Hidden USA

Australia’s ETF market reached a record $324 billion (AUD) by the end of 2025, growing 43.2% year-over-year. This expansion, supported by a 10-year compound annual growth rate (CAGR) of 28.7%, positions Australia to potentially become the third-largest ETF market in the Asia-Pacific (APAC) region.

While China and Japan lead the region with assets under management (AUM) of $861.2 billion USD and $712.5 billion USD respectively, Australia is now in close contention for the third spot. It competes directly with Taiwan and South Korea, while India also shows significant potential.

Why is the Australian ETF market expanding?

Regulatory innovation has created a mature ecosystem that allows active managers to compete more effectively. According to the provided data, the adoption of the Material Portfolio Information (MPI) model, semi-transparent ETFs, dual-access structures, and share classes have been key drivers.

Retail participation has also increased. To protect these investors, Australia mandated that ETFs carry “Active” or “Complex” labels starting in April 2024. This requirement helps advisors and platforms better classify products for model portfolios and screening.

Did You Know? As of June 2025, approximately 315,000 of the nearly 650,000 total Self-Managed Super Funds (SMSFs) in Australia hold at least one ETF.

How do active ETFs compare to passive options?

Passive ETFs still hold the majority of total assets and net new flows in Australia. However, active ETFs are gaining momentum due to their tailored and specialized investment strategies.

This shift is evidenced by traditional passive managers entering the active ETF space in 2025. Australia currently leads the APAC region in this segment, accounting for more than 57% of the region’s active ETF AUM.

Expert Insight: Samantha Carter notes that the mandatory “Active” and “Complex” labeling likely reduces the information gap for retail investors. By forcing clear classification, the regulator is shifting the burden of transparency onto the provider, which may accelerate the adoption of specialized active strategies.

What role do SMSFs play in this growth?

Self-Managed Super Funds (SMSFs) are a primary engine for ETF growth. According to J.P. Morgan’s 2025 Future of Superannuation report, SMSFs held more than $1 trillion in assets as of June 2025, representing nearly a quarter of all superannuation assets.

ETF Market Trends 2025 | Scott Helfstein on Defense Tech, AI, and Global Investment Strategies

ETF allocations within these funds reached a record high of 12%. This trend is most prominent among newly established SMSFs, where the value proposition of ETFs is increasingly recognized.

Australia’s broader retirement system is currently the fourth largest in the world with $4.3 trillion in assets. J.P. Morgan projects this system could become the second largest globally by 2031.

What happens next for the APAC market?

Australia may continue its expansion as ETF allocations grow within the SMSF distribution channel, even if large institutional investors do not yet prefer them. This trend could secure Australia’s position as the third-largest ETF market in APAC.

The region is likely to see continued regulatory adaptation. As Taiwan, South Korea, and India adjust their frameworks, competition for market share in the expanding ETF sector is expected to intensify.

Frequently Asked Questions

What was the growth rate of Australia’s ETF market in 2025?
The market ended 2025 at $324 billion (AUD), representing a 43.2% increase year-over-year.

Which countries lead the APAC ETF market in terms of AUM?
China leads with $861.2 billion USD, followed by Japan with $712.5 billion USD.

What percentage of APAC active ETF AUM is held in Australia?
Australia accounts for more than 57% of active ETF AUM across the APAC region.

Do you think the rise of active ETFs will eventually overtake the dominance of passive funds in Australia?