Australian Ethical has reported a slight decrease in funds under management (FUM) for Q2, citing challenging market conditions and ongoing impacts of its Altius acquisition.
In a quarterly update to the ASX, the fund manager saw a 1 per cent decrease in FUM, dropping from $14.28 billion as of 25 September down to $14.08 billion by 25 December.
This was divided between $4.11 billion in investments and $9.98 billion in superannuation, which were sitting at $4.38 billion and $9.90 billion, respectively, in Q1.
The positive uptick in superannuation was attributed to a 15 per cent lift in new members compared with the previous quarter following the completion of the administration transition to GROW, an uplift in digital media capability and the reactivation of the Employment Hero channel.
However, challenging market conditions over Q2 saw the fund manager’s investment performance suffer, leading to outflows of $0.11 billion.
At the same time, Unity Bank’s $0.25 billion mandate with Australian Ethical was also redeemed and transferred to Bank Australia in Q2 following the sale of its banking business to Bank Australia in November, resulting in inorganic institutional outflows.
The fund manager said: “The loss of this mandate will not impact profits, as the small annual revenue reduction of approximately $0.3 million, will be offset by a planned simplification of the business platform and cost savings as a result of this improvement.”
The mandate was part of its acquisition of sustainable fixed income manager Altius Asset Management in September 2024 from Australian Unity. According to the ASX statement, the fund manager has retained Australian Unity as a client through its investments in other fixed income funds.
Notably, the Altius acquisition reportedly put negative pressure on its FY2024-25 results, with outflows of $71 million which it attributed to fluctuating capital requirements and the seasonality of Altius’ institutional clients, while the fund manager’s FUM overall grew by $3.5 billion during this period.
Meanwhile, retail and wholesale net flows were up by $0.10 billion in Q2, driven by positive superannuation net flows of $0.11 billion, but was slightly impacted by investment outflows of $0.01 billion. Client capital management activities saw inflows of $0.07 billion.
Looking at what it achieved over Q2, Australian Ethical said it is on track with the implementation of the Charles River platforms across its investment portfolio, with its multi-asset portfolios transition set to be completed by 30 June, marking the final step after moving its fixed income and equities portfolios over the last quarter.
“This initiative is a significant step forward in building an institutional-grade investment platform, which will deliver greater efficiency, improved risk management, and scalability across investment operations ensuring that Australian Ethical is well positioned to service middle market and institutional channels,” it said.
It also completed its transition of the Australian Ethical Retail Superannuation Fund to GROW, which the fund manager suggested will deliver greater efficiency and scalability to its superannuation business and result in six months of unit cost savings in its H1 results for FY26.
Despite challenges in Q2, Australian Ethical managing director John McMurdo said he is pleased with the first half of this financial year, while H2 investment plans are set to deliver flows for the business.
“The solid pipeline we’ve built in our newer channels, as well as upcoming product innovation, also positions us well for ongoing success and continued growth into the second half of the year,” McMurdo said.
“The strength of our brand and business outlook has enabled us to attract significant talent to our team over the period, with the vacant roles in our executive team now filled with high calibre, seasoned financial services leaders, in Anthony Lane as COO and Natalie Kooyman as CRO.”
He added: “We look forward to presenting a strong half-year result at the end of February.”
In October, Australian Ethical appointed Anthony Lane as chief operating officer to manage the daily operations of the business and lead its strategic initiatives to enhance growth, resilience and efficiency as part of his role in becoming a key member of the executive leadership team.
