What Do ETF Names Mean?

Investing can be challenging enough before you even start navigating the nuances of financial terminology and jargon. While exchange-traded funds (ETFs) go a long way in increasing accessibility and transparency of investing, sometimes complicated naming conventions can make it difficult to decipher what the ETF offers exposure to. As such, the Australian Securities & Investments Commission (ASIC) have guidelines which standardise how ETFs are named.

Let’s X-Plain:

  • Why ASIC has ETF Name Guidelines
  • Components of ETF Names
  • Types of ETF Labels

Why ASIC has ETF Name Guidelines

ASIC is an independent Australian Government body which oversees corporate companies, markets, financial services, and consumer debt – effectively, they help protect consumers, and by extension, investors. Hence, ASIC’s guidelines around ETFs and how they are named are designed to enhance transparency, mitigate confusion, and empower investors to make well-informed decisions when engaging with ETFs. Clarity and accuracy in naming and labelling ultimately contribute to a more robust and trustworthy investment landscape.

Components of ETF Names

ETF names have three key components, the fund name, ticker code, and – when necessary – a relevant label.

  • Fund name is the full name of an ETF. For example, the Global X Battery Tech & Lithium ETF.
  • Ticker codes are used to identify funds on a stock exchange.
  • Labels are included in ETF names that require a classification based on the type of asset they offer exposure to.

Types of ETF Labels

In 2024, ASIC updated its ETF labelling requirements to make it even easier for investors to understand what ETF names mean and how that may affect their portfolio. They split labels into two categories, primary and secondary labels.1

Primary Labels: Product Structures

  • Exchange Traded Fund or ETF: This label is applied to exchange-traded products (ETPs) that are structured as managed investment schemes registered with ASIC or Collective Investment Vehicles (CIVs), which essentially pool money together to create a fund. ETFs typically aim to track or outperform the performance of an underlying index or benchmark.
  • Structured Product or Structured: ETPs labeled as “Structured” are securities or derivatives that provide financial exposure to the performance of underlying instruments.

Secondary Labels: ETP Risks and Investment Strategies

In addition to primary labels, ETFs may carry secondary labels that highlight specific risks or investment strategies.

  • Active: The “Active” label is used for ETFs marketed as employing an active investment objective. This means that the underlying investments are managed in a way that aims to outperform an index or benchmark, or are not tied to any specific benchmark. The index or benchmark used by such ETFs should adhere to recognized selection principles to ensure transparency and robustness.
  • Complex: ETPs labeled as “Complex” employ investment strategies that involve the use of debt, leverage, short selling, or derivatives beyond simple hedging of exchange rate or interest rate risks. These products may include leveraged or inverse positions, synthetic structures, or strategies that resemble hedge funds. When applying the “Complex” label, it is recommended to provide a clear description of the specific risks or features associated with the product.

For instance, the Global X Bloomberg Commodity (Complex) ETF. ‘ETF’ is the primary label due to the product structure and ‘(Complex)’ is used to indicate the fund invests in commodities futures, which are a synthetic asset rather than physical commodities.

Learn About ETF Investing

There is always more to learn about investing in ETFs, but these labels and naming conventions aim to make understanding and researching ETFs even easier. Check out our other articles What are ETFs? and How to Research ETFs for further information.