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Why the Australian Ethical share price has gone gangbusters

Tom Richardson
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Australian Ethical Investment Limited (ASX: AEF) shares are up 3.5 per cent to $3.70 this morning after the equities manager announced it expects earnings between $4.2 million and $4.6 million for the half-year ending December 31 2019. If achieved that would equal growth around 39% over the prior corresponding period.

AEF is a small-cap business that I’ve regularly covered and recommended to readers since 2014.

It’s a higher beta listed equities manager due to its small scale, but beta works both ways and the stock has gone gangbusters since 2014. 

After adjusting for a 100 for 1 stock split the stock is up around 800% over the period to $3.70 today.

AEF’s success is due to it growing its funds under management (FUM) strongly in percentage terms as it’s coming off a small base.

As at October 31 2019 FUM stood at $3.7 billion, which is 9 per cent more than the $3.42 billion as at June 30 2019. Net fund inflows of $170 million combined with $130 million in market appreciation to produce the most recent result. 

For a junior fund manager it’s all about inflows with AEF attracting more retail super inflows as Australians turn more environmentally conscious. Investment performance is critical to inflows as well, as you’re unlikely to drive FUM growth without at least reasonable investment performance. 

I’ve also pointed out before that AEF’s big long-term opportunity remains institutional money management. For example a single pension or charity fund mandate in this space can be a $1 billion. It could also push into the actively managed ETF space as well. 

For now AEF it’s still targeting the slightly higher margin unlisted retail space, but with competent management there’s a navigable route to more success. Some of my older articles on AEF provide more detail on the business and its opportunities. 

The other two assets mangers on the ASX, I’ve regularly recommended are Magellan Financial Group Ltd (ASX: MFG) and Macquarie Group Ltd (ASX: MQG). 

The post Why the Australian Ethical share price has gone gangbusters appeared first on Motley Fool Australia.

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Tom Richardson owns shares of Macquarie Group Limited and Magellan Financial Group.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Australian Ethical Investment Ltd. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia has recommended Australian Ethical Investment Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019