Australian Ethical Faces FUM Outflows Amid Investment Challenges
Australian Ethical has recently faced challenges in its financial management, leading to a decrease in funds under management (FUM) in the second quarter. The fund manager reported a 1% decline in FUM, dropping from $14.28 billion on September 25 to $14.08 billion by December 25.
Breaking Down the Financial Figures
As of the end of December, funds under management were split as follows:
- Investments: $4.11 billion
- Superannuation: $9.98 billion
In the previous quarter, these figures stood at $4.38 billion and $9.90 billion, respectively. Despite the overall decrease in FUM, Australian Ethical observed an increase in superannuation, attributed to a 15% rise in new members following improvements in digital capabilities and the reactivation of their Employment Hero channel.
Investment Performance and Outflows
However, high market volatility during Q2 adversely affected investment performance, resulting in outflows of $0.11 billion. Additionally, the fund manager experienced substantial institutional outflows as Unity Bank’s $0.25 billion mandate with them was redeemed and transferred to Bank Australia, following the sale of its banking division.
Australian Ethical reassured stakeholders that the loss of this mandate would not impact profits significantly. The minimal annual revenue drop of approximately $0.3 million will be offset by planned operational savings and streamlining efforts.
Acquisition and Future Outlook
These challenges partly stem from the acquisition of Altius Asset Management in September 2024, which also injected negative pressure onto the forecast for fiscal year 2024-25. Inflows from retail and wholesale channels during Q2 rose by $0.10 billion, counterbalanced slightly by investment outflows.
Operational Developments
Looking ahead, Australian Ethical is on track to implement the Charles River platforms across its investment portfolio. This major transition is expected to conclude by June 30, enhancing operational efficiency and scalability.
Furthermore, the transition of the Australian Ethical Retail Superannuation Fund to GROW is aimed at boosting operational efficiency, promising significant cost savings in the near future.
Leadership and Strategic Moves
Despite these ongoing challenges, Managing Director John McMurdo expressed optimism, noting a strong pipeline of new business channels and upcoming product innovations. The appointment of Anthony Lane as Chief Operating Officer is part of a strategic initiative to enhance growth and efficiency.
McMurdo anticipates presenting robust half-year results at the end of February, supported by a strengthened executive team and a renewed focus on long-term success.
