Why has the Australian Ethical (ASX:AEF) share price rallied 17% in a week?

Investors are scurrying to get a piece of the fund manager.

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The Australian Ethical Investment Ltd (ASX: AEF) share price is gaining some serious field position this week, having closed at its record high three consecutive days in a row now.

The Australian fund manager has benefitted immensely from a backdrop of positive retail investing trends and record inflows to its investment vehicles this quarter.

Read on for more details.

Australian Ethical charges higher on record fund inflows

As investing trends continue towards the inclusion of the retail crowd in the foreseeable future, capital continues pouring into Australian equity funds.

In fact, 2021 has been a record year for global equity markets as investors spill their hard-earned capital – or the government monies provided to them in response to COVID-19 lockdowns – into financial markets at a pace never seen before.

For instance, global equity fund inflows for the first half of 2021 were the highest on record. Just shy of $600 billion of investor capital moved into equity market funds around the world.

Australia was no different and the bulk of ASX listed funds and products gained in assets and market capitalisation during September as well.

The culmination of this enormous build-up in assets such as shares and derivatives in 2021 appears to have certainly carried over to Australian Ethical’s books.

It announced in its quarterly update that it had recorded an 8% increase in its funds under management (FUM) to an all-time high of $6.54 billion.

This growth was underscored by $160 million of cash inflows into Australian Ethical’s products. The company partially attributes this to its high net worth clients rolling over their positions. (It’s worth noting here that some investment products, like derivatives contracts, for instance, have expiry dates and need to be reinstated; or different positions require asset managers to adapt depending on market trends.)

With these underlying factors in place, it appears investors have rewarded the company this quarter.

Consequently, the Australian Ethical share price has rallied from $10.65 to $12.51 in the last week of trade after its Q3 fund flows update. At the time of writing, the company’s shares are trading at $12.56, up 0.4% on yesterday’s close.

The trading volume of Australian Ethical’s shares yesterday was also 37% higher than its 4-week average volume, indicating the demand to get a piece of the fund manager.

Australian Ethical share price snapshot

The Australian Ethical share price has climbed 151% this year to date, adding to its 173% in gains over the last 12 months.

Without question, this comes in ahead of the S&P/ASX 200 Index (ASX: XJO)’s return of around 19% in that time.

The author Zach Bristow has no positions in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended Australian Ethical Investment Ltd. The Motley Fool Australia has recommended Australian Ethical Investment Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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