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).
