The “Best of Both Worlds” Fund: Exchange Traded Funds in Australia

Abstract

Exchange Traded Funds (ETFs) are amongst the most popular mutual funds worldwide for both institutional and retail investors. In general, they offer lower fees and greater pricing transparency and liquidity than other mutual funds following the same investment strategies (Bansal and Somani, 2002; Ciccotello, Edelen, Greene and Hodges, 2002; Russel, Shekhar and Malhotra, 2004). ETFs come in a wide range of flavours but, by far, the dominant type of ETF is the passively-managed or index-tracking ETF.