Understanding Funds in Australia: Key Trends & Tips for 2025

Australian investors have never had more ways to invest, save, and build wealth than in 2025. From classic managed funds to next-generation ETFs and evolving superannuation options, the fund landscape is dynamic, diverse, and—at times—daunting. Whether you’re a first-time investor or looking to rebalance your portfolio, understanding how funds work and what’s changing this year is essential.

The Big Picture: What Is a Fund?

At its core, a fund pools money from multiple investors to invest in a diversified basket of assets. This could include shares, bonds, property, infrastructure, or even alternative assets like private equity or cryptocurrency. Australian investors encounter funds in many forms, such as:

• Managed Funds: Professionally managed pools that follow a specific strategy.

• Exchange-Traded Funds (ETFs): Index-tracking funds traded on the ASX, offering low fees and transparency.

• Superannuation Funds: Australia’s compulsory retirement savings system, with a vast array of fund options.

In 2025, the lines between these categories are blurring as new products emerge and regulation adapts to investor demand.

2025 Fund Trends: What’s New and Noteworthy?

This year, several trends are reshaping the Australian fund landscape:

• ESG Goes Mainstream: Environmental, Social, and Governance (ESG) funds now represent over 25% of new fund inflows. ASIC’s 2025 greenwashing crackdown has prompted clearer disclosures and more robust screening, making it easier for investors to align their portfolios with their values.

• Fee Compression Continues: Increased competition—especially from index-tracking ETFs—has driven management fees to historic lows. Many passive funds now charge under 0.2% p.a., while active managers are being pushed to justify higher fees through outperformance or unique strategies.

• Rise of Thematic and Alternative Funds: Themed ETFs (e.g., AI, battery tech, healthcare innovation) and alternatives (private credit, real assets, crypto) are rapidly gaining traction. The ASX reported a 30% increase in listed thematic funds over the past 12 months.

• Superannuation Fund Consolidation: Following APRA’s MySuper heatmaps and performance tests, underperforming super funds are merging or exiting the market. This means more scale and (potentially) lower costs for members, but fewer choices overall.

Regulatory and Policy Updates in 2025

Australian fund regulation has evolved to keep pace with innovation and investor protection. Key updates for 2025 include:

• ASIC Greenwashing Enforcement: With new guidelines, funds must substantiate ESG claims, disclose methodologies, and avoid vague promises.

• APRA Super Fund Performance Testing: The annual performance test now covers 90% of APRA-regulated super funds, with transparent results published for consumers. Underperformers are required to notify members and face restrictions on accepting new members.

• Taxation Tweaks: The 2025 Federal Budget introduced minor changes to managed fund tax treatment, including streamlined reporting for ETFs and updated rules for international income.

Investors should review their fund choices in light of these changes, especially if they’re in default super options or heavily exposed to high-fee active funds.

Smart Strategies for Australian Fund Investors

With choice comes complexity. Here’s how to navigate the fund maze in 2025:

• Clarify Your Goals: Are you investing for retirement, a home deposit, or short-term growth? Your timeframe and risk appetite should drive your fund selection.

• Compare Performance and Fees: Use tools like the ASX ETF screener and APRA MySuper heatmaps. Look for long-term performance net of fees, not just last year’s winners.

• Understand the Underlying Assets: Themed or alternative funds can add diversification, but also risk. Dig into what you’re really buying.

• Check For Hidden Costs: Watch out for buy/sell spreads, performance fees, and tax drag, especially in actively managed funds.

• Review Regularly: Market conditions and fund performance change. Make reviewing your fund choices an annual habit.

Case in point: In early 2025, several small-cap Australian equity funds lagged the S&P/ASX 200 by over 5% p.a. after fees, while low-cost index ETFs continued to attract record inflows. Meanwhile, super members who switched from underperforming default funds to top-performing MySuper options saw projected retirement balances increase by over $45,000, according to APRA estimates.

The Future of Funds: What Lies Ahead?

Looking forward, expect more fund innovation, greater transparency, and tighter regulation. Direct indexing, fractional investing, and AI-powered portfolio construction are all on the horizon. For Australian investors, the fundamentals remain the same: diversify, keep costs low, and match your fund choices to your personal goals.