Australian Ethical share price surges 9% on record FUM update

It appears that investors are still interested in putting money into ethical investments.

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Key points
  • Australian Ethical shares are on fire on Thursday
  • Investors were pleased to see the fund manager's FUM continue to grow in a tough environment
  • Management also revealed its profit expectations for FY 2023

The Australian Ethical Investment Ltd (ASX: AEF) share price is roaring higher on Thursday morning.

In early trade, the fund manager's shares are up 9% to $3.52.

A women cheers with clenched fists having read some good news on her laptop.

Image source: Getty Images

Why is the Australian Ethical share price on the charge?

Investors have been bidding the Australian Ethical share price higher today following the release of a business update.

According to the release, the company's funds under management (FUM) reached a record $9.02 billion at the end of May.

This reflects further positive net flows of $90 million since March, despite the challenging economic and market environment that all investment managers are experiencing. It also notes that superannuation flows remained particularly resilient.

Australian Ethical's latest FUM represents an increase of 3% since 31 March 2023 and 45% since 30 June 2022. Though, the latter doesn't include the $1.93 billion in FUM that was added from the Christian Super acquisition that completed late last year.

Speaking of which, Australian Ethical's managing director, John McMurdo, spoke positively about both the acquisition and the state of play. He said:

The business is now better positioned than ever for further headline and earnings growth following the successful integration of the Christian Super successor funds transfer (SFT), and following positive investments' returns, and organic net cashflows.

In respect to the SFT, the company advised that it will now turn its focus to extracting further middle and back-office synergies.

Guidance

Also giving the Australian Ethical share price a boost today was the company's guidance for the second half of FY 2023.

Management revealed that revenue is expected to be approximately 21% higher than the first half driven by higher average FUM.

It will be the same for its second-half underlying profit after tax (UPAT), which is expected to be approximately 30% higher than the first half and in a range of $6.3 million to $6.8 million.

This will take its full year UPAT before performance fees to $11.3 million to $11.8 million. Management explained that stronger revenue and disciplined cost management have contributed to the emergence of operating leverage and the underlying profit increase.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Australian Ethical Investment. The Motley Fool Australia has recommended Australian Ethical Investment. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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