The Australian Ethical Investment Limited (ASX: AEF) share price is up more than 3% after revealing outperformance in its funds.
Outperformance
Australian Ethical Investment told investors that its Emerging Companies Fund will pay a performance fee of $2.89 million after outperforming the benchmark, the S&P/ASX Small Industrials over the last 12 months.
The company said its Emerging Companies Fund returned 51.1% after all fees (including the performance fee) for wholesale investors for FY21, compared to the benchmark which returned 33%.
The performance fee is 20% (less unrecovered GST) of the fund’s one year outperformance over its benchmark. It is calculated daily based on that day’s FUM and that day’s performance against the benchmark. It does not take into account the effects of compounding in the published performance returns.
Australian Ethical said that the performance fee revenue less tax and constitutional grant to the Australian Ethical Foundation adds to guidance on underlying profit after tax (UPAT) announced at the end of May 2021.
The UPAT for the year ending 30 June 2021 is expected to be between $10.7 million and $11.2 million, a mid-point increase of 18% on the 12 months ended 30 June 2020.
The Australian Ethical Emerging Companies Fund has been very successful since it launched in 2015 according to the company. The aim of it is to invest in a diversified portfolio of small capitalisation companies and combines ethics with investment expertise to deliver market leading returns and a positive impact.
What to make of the Australian Ethical share price
Australian Ethical shares have been a strong performer over the last six months – up 74.5%.
That’s including a 12.5% decline from the peak near the end of May 2021.
Australian Ethical is a very interesting business. It is one of the ways that to capture the increasing investor interest in greener products, services and companies. Remember, Australian Ethical earns higher management fees as its funds under management (FUM) grows.
But not only that, but those greener and more ethical companies have also been performing well.
However, today’s valuation is high. Compared to its peers, Australian Ethical has a high price/earnings ratio. Being exposed to the growth of superannuation is useful, but I’m not sure if it’s a good idea to buy when it’s valued at this high multiple.
