Open-end funds have long been a cornerstone for Australians building diversified portfolios. In 2025, with regulatory tweaks and shifting market dynamics, understanding how these funds operate—and how they fit into your investment strategy—has never been more important. Whether you’re a seasoned investor or just starting out, this guide breaks down what open-end funds are, why they’re popular, and what’s new for Aussies this year.
What Is an Open-End Fund?
An open-end fund is a type of managed investment fund that doesn’t have a fixed number of shares. Instead, it issues and redeems shares on demand at the fund’s net asset value (NAV). In Australia, these are commonly known as managed funds or unit trusts, and they allow investors to pool money together to access a professionally managed portfolio of shares, bonds, or other assets.
- Liquidity: Investors can buy or sell units at the current NAV, typically on any business day.
- Diversification: Funds invest in a broad mix of assets, reducing risk compared to buying single shares.
- Professional Management: Fund managers handle research, asset selection, and portfolio balancing.
In contrast, closed-end funds have a fixed number of shares and often trade at a premium or discount to NAV on the stock exchange.
2025 Regulatory Updates Affecting Open-End Funds
This year, ASIC and APRA have rolled out several policy adjustments that directly impact open-end funds:
- Stricter Liquidity Standards: Following global market volatility, funds are now required to hold higher levels of liquid assets. This is to ensure they can meet redemption requests even during turbulent periods.
- Enhanced Disclosure: As of March 2025, all retail open-end funds must provide clearer, more timely updates on their portfolio holdings and associated risks. This move aims to boost transparency and rebuild trust after several high-profile fund suspensions in 2024.
- Fee Structures Under Scrutiny: The Treasury has begun a review into the fee structures of managed funds, with a focus on performance fees and transparency. Expect more competitive fee offerings as fund managers adapt to the new landscape.
These changes are designed to protect retail investors and prevent the liquidity mismatches that caused headaches during previous market corrections.
Why Do Australians Favour Open-End Funds?
Open-end funds remain a top pick for everyday investors and SMSFs (self-managed super funds) alike. Here’s why:
- Easy Access: Minimum investment thresholds are often low—sometimes just a few hundred dollars—making them accessible for most Australians.
- Automatic Reinvestment: Many funds offer distribution reinvestment plans, compounding returns over time.
- Regulated Environment: Australian open-end funds are heavily regulated by ASIC, giving investors a degree of protection not always available in unlisted investments.
- Tax Advantages: Many managed funds are structured to pass capital gains and franking credits through to investors, which can boost after-tax returns.
For example, the popular Vanguard Australian Shares Index Fund saw significant inflows in early 2025, as Australians sought low-cost, diversified exposure to the ASX 300 without needing to buy each share individually.
Risks and Considerations in 2025
Despite their appeal, open-end funds are not risk-free:
- Market Risk: The value of your investment moves with the underlying assets—if markets fall, so does your fund’s NAV.
- Redemption Delays: In rare cases (as seen during the March 2020 COVID sell-off and again during the 2024 property fund liquidity crunch), funds may temporarily suspend redemptions to protect remaining investors.
- Performance Dispersion: Not all funds are created equal—fees, manager skill, and asset selection can lead to vastly different outcomes. Comparing long-term performance and costs is vital.
Before investing, check the Product Disclosure Statement (PDS) for each fund and review its historical performance, fee structure, and liquidity provisions.
How to Choose an Open-End Fund in 2025
Picking the right fund means considering your goals, risk tolerance, and investment horizon. Here are a few tips for 2025:
- Look for low-cost index funds if you want broad market exposure with minimal fees.
- For more active strategies, scrutinise manager track records and consistency.
- Pay attention to new regulatory disclosures—2025’s enhanced transparency makes it easier to see what you’re investing in.
- Check liquidity metrics, especially if you’re investing in property or credit funds.
Platforms like the ASX mFund Settlement Service and leading online brokers make it straightforward to compare and invest in a wide range of open-end funds.
