The Australian Ethical Investment Limited (ASX: AEF) share price holds the unfortunate title of being the worst performer on the S&P/ASX 300 Index (ASX: XKO). Down 1.8% at the time of writing, Australian Ethical's share price has dropped 32% so far in August. That compares to a 3% gain for the ASX 300.
Like most shares trading on the ASX, Australian Ethical was savaged by the COVID-19 driven market rout. Australian Ethical's share price tumbled 59% from February 18 to March 23. From that low, shareholders enjoyed meteoric rise through June 19. The share price gained 316% to reach an all-time high of $9.07 per share. Shares have dropped 54% since that high, but the Australian Ethical share price is still up 5% year-to-date.
What does Australian Ethical do?
The company is one of Australia's leading ethical wealth managers. It has provided investors with ethical wealth management products since 1986. Its investments are guided by the Australian Ethical Charter which underpins the company's culture and vision.
As at June 30 2020, Australian Ethical had more than $4 billion in funds under management, across superannuation and managed funds.
The company listed on the ASX in 2002.
Why is the share price down 32% in August?
Australian Ethical's share price began its slide in late June, after the fund manager released its guidance for FY 2020. While still forecasting an increase in underlying profit after tax before performance fees, the forecast profit growth was less than half the 38% delivered in its first half.
The selloff continued after financial services company IOOF Holdings Limited (ASX: IFL), announced on August 7 that it had sold approximately 14.2 million shares or 72% of its holdings in Australian Ethical. At a total consideration of $74.5 million, IOOF received an average of $5.25 per share. That's well above the current share price of $4.14.
Atop its reduced forward guidance and IOOF's major divestment, it's worth noting that momentum works in both directions. When a company's share price is falling, it may trigger investor's pre-set stop losses. It will also likely raise red flags for other shareholders, who may be drawn to the companies making headlines, like gold and technology shares.
While Australian Ethical's share price kept climbing in the first months of the global pandemic, it's also possible that investors have temporarily shifted their ethics to the backburner.
