Australian Ethical (ASX: AEF) shares have dropped 6% after the company gave an FY20 update.
What is Australian Ethical?
Australian Ethical describes itself as Australia’s leading ethical investment manager. It was formed in 1986 to provide investors with wealth management products that align with their values and provide competitive returns. Investments are guided by the Australian Ethical Charter. It has $3.92 billion of funds under management (FUM) across its managed funds and superannuation.
The update
Underlying profit after tax (UPAT) before performance fees for the year ending 30 June 2020 is expected to be between $6.8 million to $7.5 million. The mid-point of this would be a 10% increased compared to the profit from FY19.
Any performance fee from the emerging companies fund will only crystallise on 30 June 2020.
The company made $4.4 million of UPAT in the first half of FY20. COVID-19 has impacted investment performance and the FUM balance, which in turn hurts second half earnings. The fund manager has also reduced superannuation admin fees from 1 April 2020 and there has been processing costs relating to the early release of super.
However, despite that, Australian Ethical said it continues to experience investor and member acquisition and net flows.
FUM since 31 March 2020
At 31 May 2020 Australian Ethical’s FUM had increased by 9.1% to $3.92 billion, up from $3.59 billion at 31 March 2020.
The company experienced net inflows of $0.05 billion during the quarter, which includes $0.03 billion of outflows after the Federal Government’s changes to the early release of superannuation conditions.
Summary
To me, Australian Ethical is one of the most promising fund managers on the ASX. I’m not surprised to see that the share price has fallen a bit this morning, I think it may have gotten ahead of itself. I’m not sure what the right price to pay is. It’d be nice to buy under $5, but will it ever go back to that level?
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Disclosure: At the time of writing, Jaz doesn’t own shares in any of the businesses mentioned.
