6 ETF Secrets the Super-Rich Use to Their Advantage

Australia’s ETF industry is on fire.  

It grew 32.8% in the year to June to $372.6 billion across 494 products, driven by $61 billion of net inflows, and now represents 7.8% of Australia’s $4.8 trillion managed funds pool. 

The wealthiest investors, and the professionals who manage their money, are in the know about ETFs.  

They use them differently: to cut costs where skill is scarce, manage tax, buy investment factors cheaply, hold bonds efficiently and rebalance without emotion.  

The good news is none of these ETF secrets requires a family office with a vast, experienced team to access the benefits.  

Here’s how any individual investor can apply the same winning thinking… 

Key Takeaways 

• Advised SMSFs held 44% of their portfolios in ETFs in 2025, against 9.3% for self-directed funds. 
  
  
• Some 78% of active Australian equity funds trailed the ASX 200 in the first half of 2026, so the wealthy pay for skill only where it is proven. 
  
  
• The ETF structure can shield investors from tax triggered by other investors’ redemptions, an edge that matters more as CGT rules change in 2027. 
  
  
• Smart beta ETFs drew inflows of $7.2 billion in the year to July, giving investors factor exposures once reserved for costly active mandates. 
  
  
• The real secret is a superior process: rules-based rebalancing and disciplined trading are far more likely to lead to outperformance than a hot product or stock. 
  
  

How the Super-Rich Use ETFs to Their Advantage 

Family offices do not publish their trades, so the evidence comes from surveys and platform data.  

The UBS Global Family Office Report 2026 surveyed 307 family offices with an average net worth of US$2.7 billion.  

It described ‘a deliberate shift toward greater diversification across asset classes, currencies, and jurisdictions’.  

Some 60% plan to change their strategic asset allocation this year, the highest share in the survey’s history, Modus reported.  

Tellingly, 68% have formal performance measurement and 60% run investment committees. 

In Australia, the best proxy for professionally managed private wealth is the advised SMSF market.  

Brokerage firm AUSIEX found advisers allocated 44% of SMSF portfolios to ETFs in 2025, compared with 9.3% for self-directed trustees. That’s an allocation more than five times the 7.8% ETF share of the wider managed funds universe, so it speaks volumes about the popularity of ETFs amongst Australia’s wealthiest investors. 

Advised SMSFs use ETFs almost five times as heavily as self-directed funds. Data: AUSIEX via SMS Magazine. 

That brings us to the six ETF secrets the wealthy often use to their advantage… 

Secret One: Pay for Skill Only Where It Is Proven 

The first habit is ruthlessness about fees.  

S&P Dow Jones Indices’ latest SPIVA scorecard found 78% of Australian equity general funds failed to beat the ASX 200 in the first half of 2026, and 89% underperformed over 15 years.  

In the words of S&P’s Sue Lee: ‘The first half of 2026 proved challenging for active managers.’ 

Data: S&P Dow Jones Indices SPIVA Australia Scorecard via Financial Standard. 

With this knowledge in mind, wealthy portfolios typically anchor on a low-cost index core. 

The cost savings are higher than ever.  

Broad-market ETFs now charge as little as 0.03% p.a. against an ETF market average of 0.53% p.a.  

Instead, wealthy investors tend to reserve the higher active-management fees they are prepared to pay for areas with a better track record.  

Australian bond funds, for example, recorded majority outperformance for three straight years to December 2025.  

Tip: Our hidden index hugger test helps investors check whether an active fund earns its fees. 

Secret Two: Let the Structure Do the Tax Work on Your Behalf 

When investors leave an unlisted fund, the manager may sell assets to pay them, and the resulting gains can be distributed to everyone who stays.  

ETFs largely avoid this because units change hands on the exchange, and issuers can stream capital gains to redeeming investors, so remaining holders are not worse off.  

Morningstar notes that efficiency varies by strategy, citing a concentrated global ETF as a cautionary tale. 

Wealthy investors also use ETFs for tax-loss harvesting, selling a loss-making holding and switching into a similar ETF tracking a different index to stay invested.  

The ATO is sceptical of arrangements where the replacement is substantially identical, so it is important to have genuine portfolio reasons and keep good records. 

With the 50% CGT discount giving way to indexation and a 30% minimum tax from July 2027, some investors have already started restructuring and tilting their portfolios towards income-producing ETFs.  

Secret Three: Buy Factors, Not Fees 

Tilting towards value, quality, size or income once meant hiring an active manager with that specific expertise. 

No longer is that the case.  

Increasingly, investors are able to access rules-based smart beta ETFs.  

This fast-growing sub-segment of the ETF universe drew a record $878 million in July and $7.2 billion over 12 months, led by yield, quality and size strategies.  

Smart beta ETFs sit between traditional ETFs and active management, with far lower fees than the latter. 

Data: Global X ETF Market Scoop, July 2026. Chart: InvestmentMarkets. 

The caveat with smart beta ETFs is that factors can lag for years, and the applied rules make a significant difference to the outcomes.  

Secret Four: Use ETFs for the Boring Bits 

The wealthy are just as likely to use ETFs for bonds and global diversification as for growth.  

Case in point: among AUSIEX’s SMSF clients, the net value traded in Australian dollar fixed income ETFs rose 46.6% in a year, with 96% coming from advised funds.  

AUSIEX’s Christopher Hill observed, ‘Advised SMSFs are becoming significant participants in fixed-income markets.’  

Across the market, bond ETFs drew a record $1.4 billion in July.  

More broadly, SMSF allocations to ETFs rose to 7.2% of assets in 2025–26, with 35.5% of funds holding at least one.  

Secret Five: Rebalance with Rules, Not Headlines 

One of the greatest advantages family offices possess is a genuinely long-term investment horizon.  

This allows them to make measured adjustments rather than abrupt shifts.  

They buy weakness via ETFs when the market offers up opportunities. 

They take the emotion out of the process by establishing buying rules or pre-set rebalancing bands ahead of bouts of volatility. They know that their emotions tend to be their own worst enemies as investors. 

For example, after record June outflows, investors put $334 million into gold and gold-mining ETFs in July, and they bought into Australian technology after it fell more than 40%.  

Secret Six: Trade Like an Institution 

Professionals treat execution as a cost to manage and minimise.  

They use limit orders, avoid the first and last minutes of trading when spreads are wider, and check a fund’s underlying liquidity rather than its on-screen volume.  

They understand that an ETF’s management fee is only part of the bill. 

The Risks and Trade-Offs 

The ETF boom cuts both ways.  

With nearly 500 ETFs on the market, closures do happen: four active ETFs shut in May after failing to raise enough assets. 

Themes can also turn quickly.  

Space ETFs fell almost 30% in July, while bitcoin and ether ETFs lost more than 50% over the year to July.  

Concentrated thematic bets are the opposite of how the wealthy build portfolios, and even core ETFs carry market risk. 

Most of the past year’s growth came from new money rather than market gains. Data: Global X. 

A Superior Process Is the Ultimate Secret 

The super-rich don’t have access to secret ETFs.  

What they have is a timeworn process: a cheap, diversified core; active fees paid only where evidence supports them; attention to tax structure; bonds and global assets used deliberately; and rebalancing and trading governed by rules.  

Each of those strategies is available to individual investors; what they need is a family office’s discipline rather than a trader’s impulses.  

Frequently Asked Questions 

Do Wealthy Investors Use ETFs? 

Yes. Advised SMSFs held 44% of their portfolios in ETFs in 2025, and ETFs are widely used by private wealth managers for low-cost core exposure, bonds and global diversification. 

Are ETFs More Tax-Efficient Than Managed Funds in Australia? 

Often, because ETF units trade on the exchange and issuers can allocate gains to redeeming investors. Efficiency varies by strategy, and higher-turnover or concentrated ETFs can still distribute sizeable gains. 

What Is a Smart Beta ETF? 

A rules-based ETF that tilts towards factors such as value, quality, size or dividend yield instead of simply weighting companies by market size. 

Can I Tax-Loss Harvest with ETFs in Australia? 

Realising genuine losses is legal, but the ATO can disallow losses from wash sales where an investor immediately buys back the same or a substantially identical asset. Professional tax advice is recommended. 

How Big Is the Australian ETF Market? 

The market stood at $373 billion across 494 products at the end of June 2026, according to Global X. 

Disclaimer: This article is prepared by Simon Turner. It is for educational purposes only. While all reasonable care has been taken by the author in the preparation of this information, the author and InvestmentMarkets (Aust) Pty. Ltd. as publisher take no responsibility for any actions taken based on information contained herein or for any errors or omissions within it. Interested parties should seek independent professional advice prior to acting on any information presented. Please note past performance is not a reliable indicator of future performance.