Why the Australian Ethical share price has gone gangbusters

AEF is a small-cap business that I've regularly covered and recommended to readers since 2014. In that time it's up around 800%.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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). 

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.

More on Share Market News

two men smiling with a laptop in front of them, symbolising a rising share price.
Broker Notes

These ASX 200 shares could rise 25% to 60%

Analysts think these shares are top buys and could rise materially.

Read more »

A man looking at his laptop and thinking.
Share Gainers

Here are the top 10 ASX 200 shares today

Investors finished the trading week on a sour note today.

Read more »

Happy teen friends jumping in front of a wall.
Share Gainers

4 ASX 200 stocks smashing the benchmark this week

Investors are sending these four ASX 200 stocks soaring this week. But why?

Read more »

A happy young couple lie on a wooden deck using a skateboard for a pillow.
Broker Notes

Bell Potter says this growing ASX 200 stock can rise over 40%

Big returns could be on the cards for buyers of this stock.

Read more »

Broker written in white with a man drawing a yellow underline.
Broker Notes

Brokers name 3 ASX shares to buy today

Here's why brokers are feeling bullish about these three shares this week.

Read more »

A couple makes silly chip moustache faces and take a selfie on their phone.
Share Market News

Which delivered superior returns in FY25: CSL, A2 Milk, or Telstra shares?

We review the share price growth and dividend income delivered to investors in FY25.

Read more »

Woman with an amazed expression has her hands and arms out with a laptop in front of her.
Share Gainers

Why IGO, Johns Lyng, Lynas, and Web Travel shares are pushing higher today

These shares are ending the week on a high. But why?

Read more »

Person with thumbs down and a red sad face poster covering the face.
Share Fallers

Why Imricor, Ora Banda, Ventia, and Vulcan shares are dropping today

These shares are ending the week in the red. But why?

Read more »