Australian Ethical has achieved a new milestone in funds under management (FUM), with positive net flows and strong investment performance driving funds to $13 billion.
Retail and wholesale net flows topped $173 million for the quarter, driven by superannuation and the relatively new values-aligned channel, Australian Ethical said in an ASX listing on Monday.
The investment manager explained that superannuation flows fell to $101 million last quarter due to a seven-week service disruption during Mercer’s transition to Grow. Despite this, record superannuation guarantee contributions kept flows solid.
With the transition complete and marketing resuming, flows are expected to stabilise in the second half, it said.
Investments net flows (excluding institutional) were $72 million with positive inflows from the values-aligned channel, which focuses on not-for-profit organisations, including charities and foundations as well as values-aligned businesses looking to invest their funds with an aligned fund manager.
“A mark of the strength of our business model and resilience is that even in a period where we were not able to promote and generate new superannuation business at our normal rate (given the administrator change and disruption), our other channels continued to provide meaningful uplift,” managing director John McMurdo said.
“It’s particularly pleasing to see the strong investment performance over the last 12-month period, for example, our wholesale Australian Shares Fund returned 17.9 per cent, showcasing the calibre of our investment team and providing further market evidence that good can do better.”
As part of the acquisition of the Altius business, Australian Ethical now serves a number of institutional clients, including Australian Unity, which utilises-short term Altius fixed income funds for working capital management.
As such, Australian Ethical said these funds experience seasonal fluctuations (inflows and outflows) as capital requirements change for AU, with net outflows of $58 million reported for this channel.
Reflecting on Australian Ethical’s purpose to deliver investment outcomes achieved ethically, McMurdo said the investment manager will “continue pressuring the financial industry and the companies we invest in to reduce, transition and stop activities which worsen climate change”.
“Climate change risks and costs affect investors, directly and indirectly, short term and over the long term, and recent extreme weather events illustrate the growing financial as well as human impact of environmental degradation,” he said.
Touching also on the successful transition of its custody services to State Street as well as the transition of its Mercer super administration services to Grow, McMurdo said these programs will deliver the “strengthened business platform, improved efficiencies and unit cost savings that will underpin our continued growth and further future profit and operating leverage improvement in the medium term”.
Australian Ethical’s half-year results are scheduled to be announced on 27 February.
