Exchange traded funds (ETFs) are investment funds that can be bought and sold on a securities exchange. ETFs can generally be described as passive or active. Passive ETFs aim to follow a benchmark or index as closely as possible and will go up and down in value in line with the index they are tracking. On the other hand, Active ETFs actively try to outperform the market or index. They are for investors who prefer an active investing strategy and want their investments to aim to outperform an index or benchmark.

Many types of investors use Active ETFs because they provide a cost-effective way to access a professionally managed, diversified mix of investments and can fit in well with a variety of platforms and investment structures.

Active ETFs can offer investors access to a diversified portfolio of investments, combined with having greater convenience and transparency of their investments. The key benefits of Active ETFs include:

• Convenience: Active ETFs are traded on securities exchanges, which means you can buy and sell Active ETF units via your broker, just like you would do if you were buying and selling shares.
• Diversification: Active ETFs help diversify an investor’s portfolio across markets or asset classes that can be difficult to access.
• Transparency: The security holdings of the Active ETF are typically published on the issuer website. This not only means you can review the securities held by your Active ETF, but also it means the market can accurately price the ETF throughout the day.
• Income: All income received by the fund through the year is fully paid to unitholders. It is generally paid each quarter. Investors are able to elect to receive this income in the form of additional units via a Distribution Reinvestment Plan (DRP) or as cash.
• Fair value for investors: Active ETFs are designed to trade at a price that is close to their underlying net asset value (NAV). This means that the price you pay should closely reflect the underlying assets of the fund.

All investments carry risk that the value of your investment could go up or down. Key risks of investing in Active ETFs include:

• Market risk: The securities that the fund owns may go up or may go down.
• Interest rate risk: For fixed income Active ETFs, securities can decline in value because of changes in interest rates.
• Liquidity risk: If the underlying securities of the ETF become harder to buy then the ETF may become harder (or more expensive) to buy.

Active ETFs operate in a similar way to managed funds, in that they are professionally managed by an investment manager, who makes active decisions about what to invest in.

However, unlike managed funds, there are no lengthy application forms. Units in an Active ETF are only available to be bought or sold through a broker and the exchange. You need a broking or trading account to buy an Active ETF.

Active ETFs are open ended funds. This means the supply of units is matched with the demand of units and the price can be relied upon to approximate the NAV of the fund (whilst also reflecting the liquidity of the underlying assets).

Active ETFs are priced throughout the trading day and investors can trade at real time prices. Active ETFs are settled on a two-day basis, and the settlement (exchange of cash for ETF units) happens through your trading account and CHESS.

The Janus Henderson Tactical Income Active ETF can be bought and sold via a broker in the same way you buy or sell a share. There are two main ways you can invest:

1. Via your broker or a licenced financial adviser
2. Directly via your online trading account

Most Active ETFs will pay a quarterly or semi-annual distribution. Most Active ETFs, including TACT, offer a Distribution Reinvestment Plan (DRP) which allows investors to reinvest their income and continually grow their investment.

A Distribution Reinvestment Plan (DRP) is a scheme that allows investors to select to purchase new units with their quarterly income, instead of receiving it as a cash payment.

Investors can sign up for the DRP by contacting Computershare, the ETF share registry, or by making the necessary selection on their website.

The Janus Henderson Tactical Income Active ETF is structured as an additional share class of the Janus Henderson Tactical Income Fund (unlisted fund). The fund (being both classes) is structured as a Managed Investment Scheme and is regulated by ASIC.

The investment outcomes of the ETF and the unlisted fund are the same. Both share classes are exposed to the changes in value of the securities held in the fund.

The differences between the ETF and the managed fund are that the ETF is accessed via the exchange (Cboe) and settlement is done via CHESS. The managed fund is accessed via platforms or directly with Janus Henderson.

Cboe Australia (CXA) is a securities and derivatives exchange and an alternative to the Australian Securities Exchange (ASX). For investors, the investment processes are identical to share transactions on the ASX and there are no additional access requirements.

Just like any share you may have invested in, after the end of a financial year you will receive personal tax statement regarding your investment in the fund, setting out the components of any income received during that financial year. This can be used to help you with your tax returns for the year.

The details of your investment in the Janus Henderson Tactical Income Active ETF are held by Computershare, the share registry. They are not held by Janus Henderson. To change your banking details, to provide your Tax File Number (TFN), to make a DRP election, to change your mailing address, you need to contact Computershare and make the necessary changes there.

Most investors view their holdings and ETF valuations via their broker, online broking account or financial adviser.