The Australian Ethical Investment Limited (ASX: AEF) share price has fallen 3.6% so far today on updated guidance and its quarterly funds under management (FUM) update.
One of the biggest profit drivers for Australian Ethical is how much funds that it's managing. For the quarter ended 31 December 2017 funds under management increased by 7.8% to $2,602.4 million from $2,414.9 million as at 30 September 2017.
Of the total growth, $84.2 million was net inflows to the manager and $103.3 million was related to market movements and net income.
The net flow increase that Australian Ethical experienced this quarter was smaller than what it experienced in the September 2017 quarter, but it still achieved very good growth.
Australian Ethical also updated the market with the earnings guidance that it first provided on 25 October 2017.
The company said that net profit after tax (NPAT) for the six months ending 31 December 2017 is expected to be at the upper end of the guidance range provided of between $1.6 million to $2.3 million. Underlying profit after tax (UPAT) is expected to be in line with NPAT.
The above earnings guidance is based on unaudited management accounts and subject to audit and final Board approval, so investors should wait until the half-year report in February to get the final picture.
Foolish takeaway
I think Australian Ethical is one of the most promising fund manager businesses on the ASX. There is a clear demand from investors to have their investments align with their values whilst still delivering strong returns.
If Australian Ethical wins a big mandate from a superannuation fund then the business could experience a large increase of FUM. I'd be happy to own shares today, although I don't currently own. I think it could be worth a long-term buy with today's price weakness.
