The Australian Ethical Investment Limited (ASX: AEF) share price is down 3.56% amid news of a potential deal with Christian Super.
Australian Ethical is a fund manager that offers superannuation services.
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Potential Australian Ethical merger with Christian Super?
Australian Ethical announced today that its superannuation subsidiary, Australian Ethical Superannuation, has signed an exclusive memorandum of understanding with Christian Super to explore a potential merger.
At this stage, the two parties have entered a non-binding period of due diligence and transition planning. If successfully concluded, Christian Super members will join Australian Ethical Super through a successor fund transfer in late 2022 or early 2023.
Australian Ethical expects to complete the due diligence process by the end of May 2022. The company plans to release more details once it is complete.
What's attractive about a potential deal for Australian Ethical?
The fund manager said that both parties are confident the opportunity aligns with members' best financial interests, offering "compelling" member benefits through increased scale, while also significantly amplifying their "combined impact as proven pioneers of ethical and responsible investing."
If this merger goes ahead, it could see Australian Ethical manage more than $9 billion. That would be on behalf of 100,000 Australians across its range of superannuation, managed fund and exchange-traded fund (ETF) products.
According to Christian Super, it has 30,000 members and around $2 billion of funds under management (FUM).
Why is Christian Super considering this?
APRA recently imposed additional licence conditions on the trustee of Christian Super, Christian Super Pty Ltd. The conditions are to protect the best financial interests of the fund's members.
They address concerns arising from APRA's investigation into Christian Super's investment oversight, governance and strategic decision making. The conditions also aim to "rectify[ing] Christian Super's persistent investment underperformance, which culminated in the fund's MySuper product failing the first annual performance test" in August 2021.
Under those terms, Christian Super is required to merge with a larger, better-performing fund by 31 July 2022.
Christian Super acknowledges that being part of a larger fund with more members and retirement savings is likely to deliver additional financial benefits to Christian Super members.
Why choose Australian Ethical? According to the Christian Super board, it seemed the most attractive when evaluating various factors.
Board commentary
Chair of Australian Ethical Steve Gibbs said:
We're delighted to be exploring this opportunity with Christian Super. It is a meaningful endorsement of our purpose and investment philosophy, which remain unchanged and only strengthened by this opportunity.
Recent research shows that more Australians than ever expect their money to be invested responsibly and ethically. This comes as no surprise to us at Australian Ethical. We've seen extraordinary growth as Australians seek to invest in line with their values.
This opportunity not only accelerates the trajectory we are on through clear stakeholder benefits but also significantly enhances our influence as the leading ethical investment voice in Australia.
Australian Ethical share price snapshot
Since the start of the 2022 year, the Australian Ethical share price has dropped 48.8%.
