InvestSMART’s DRP Default Shift Could Alter Distribution Dynamics for ETFs
InvestSMART Funds Management has updated the Distribution Reinvestment Plan rules for its Intelligent Investor Active ETFs, making DRP participation automatic for new investors from January 2026 unless they opt out.
- DRP participation becomes default for new investors from 1 January 2026
- Existing investors' DRP participation remains unchanged
- Applies to four Intelligent Investor Active ETFs managed by InvestSMART
- Detailed DRP rules clarify participation, unit issuance, and administration
- InvestSMART retains discretion to vary, suspend, or terminate the DRP
Background and Scope
InvestSMART Funds Management Limited, the responsible entity for the Intelligent Investor suite of Active Exchange Traded Funds (ETFs), has announced an important update to its Distribution Reinvestment Plan (DRP) rules. The change, effective from 1 January 2026, will make participation in the DRP the default setting for all new investors in the Intelligent Investor Australian Equity Income Fund, Equity Growth Fund, Ethical Share Fund, and Select Value Share Fund.
What the DRP Change Means
Under the updated rules, new unitholders will automatically reinvest their distributions into additional units of the fund unless they actively choose to opt out. This contrasts with the previous approach where investors had to opt in to participate. Existing investors' participation status will remain unchanged, preserving their current choice to participate or not.
The DRP allows investors to compound their investment by using distributions to purchase more units without incurring brokerage fees, which can be an attractive feature for long-term investors seeking to grow their holdings steadily.
Operational and Legal Framework
The updated DRP rules provide comprehensive guidance on eligibility, participation levels (full or partial), unit issuance pricing based on net asset value, and administrative procedures. The Responsible Entity retains discretion to vary, suspend, or terminate the plan, ensuring flexibility to respond to market or regulatory changes.
Importantly, the plan excludes fractional unit entitlements and any residual cash balances are carried forward without interest. The rules also clarify that units issued under the DRP rank equally with existing units and participate fully in future distributions.
Investor Considerations and Market Impact
By making DRP participation the default for new investors, InvestSMART is likely encouraging a higher uptake of reinvestment, which can support fund growth and potentially reduce cash outflows. This move aligns with broader industry trends favoring automatic reinvestment to enhance investor compounding benefits.
However, investors who prefer to receive cash distributions will need to actively opt out, highlighting the importance of clear communication from InvestSMART to ensure investors understand their options. The impact on unit issuance volumes and fund liquidity will be worth monitoring in the months following implementation.
Looking Ahead
As the DRP changes take effect in early 2026, market participants and analysts will be watching for shifts in investor behavior and fund performance metrics. The update reflects InvestSMART’s ongoing efforts to streamline fund management and enhance investor experience within the Intelligent Investor ETF range.
Bottom Line?
InvestSMART’s default DRP opt-in signals a strategic push to boost reinvestment and fund growth, setting the stage for evolving investor engagement in 2026.
Questions in the middle?
- What proportion of new investors will choose to opt out of the DRP under the new default setting?
- How will increased DRP participation affect unit issuance and fund liquidity in the Intelligent Investor ETFs?
- Will InvestSMART consider similar DRP default changes for other funds in its portfolio?
