The Australian Ethical Investment Limited (ASX: AEF) share price went down 13% today, continuing a very volatile start to the year for the business.
This ethically-focused fund manager has seen a lot of ups and downs over the past year. Despite dropping 36% since the start of 2022, it is still slightly up over the past six months.
What's going on with the Australian Ethical share price?
Many ASX shares that are seen as growth stocks have dropped heavily since the start of 2022 such as Xero Limited (ASX: XRO) which has fallen 25%. There is increasing commentary and concern that inflation is too high and interest rates are going to increase sooner and faster than previously expected.
Higher interest rates can have a negative impact on asset valuations.
Fund managers can suffer from a double (or triple) negative effect. Not only can investors value the earnings lower, but the funds under management (FUM) can drop if a fund manager's investments fall in value and people become fearful and withdraw funds.
FUM rose to December 2021
Investors haven't yet had an update about how FUM is going in the 2022 calendar year.
However, investors have been told that at 31 December 2021, Australian Ethical's FUM had grown to $6.94 billion. That was an increase of 6% from 30 September 2021. It was also a rise of 14.3% from June 2021.
Whilst investment returns are helping grow the FUM, it's the net flows that helped drive the FUM higher. In the latest quarter, net inflows were $310 million and in the half-year it saw net inflows of $600 million.
Profit growth expected
Australian Ethical told investors in December that it's expecting to generate underlying profit after tax (UPAT) before performance fees for the half-year ending 31 December 2021 to be between $5 million to $5.5 million. The mid-point would represent an increase of 8% on the FY21 half-year result.
The ASX share is planning to keep investing in its high-growth strategy because of the positive momentum it's experiencing and the scale of the opportunity ahead.
Australian Ethical is expecting second half costs to be higher than the first half as it implements its strategic roadmap.
Launch of a new exchange-traded fund (ETF)
The ethical fund manager has launched an ETF for investors to access its offering in a different way.
AEAE, the first ETF launched by the business, is focused on a basket of stocks from the S&P/ASX 300 (INDEXASX: XKO). It's actively managed, with the ethical overlay that the fund manager is famous for, whilst also aiming to find ASX shares capable of market outperformance.
At the moment, some of its biggest holdings include: Bank of Queensland Limited (ASX: BOQ), Coles Group Ltd (ASX: COL), Suncorp Group Ltd (ASX: SUN), Westpac Banking Corp (ASX: WBC), Telstra Corporation Ltd (ASX: TLS) and Fletcher Building Limited (ASX: FBU).
