Institutional Mandate Loss Tests Australian Ethical’s Growth Momentum
Australian Ethical reported a slight 1% decline in funds under management to $14.08 billion for December 2025, balancing positive retail flows against institutional mandate losses and market headwinds.
- Funds under management decreased by 1% to $14.08 billion
- Positive retail and wholesale net flows of $0.10 billion driven by superannuation growth
- Loss of $0.25 billion institutional mandate following sale to Bank Australia
- Completion of superannuation platform transition to GROW delivering cost efficiencies
- Recognition for ESG leadership with awards for superannuation products
Navigating a Challenging Quarter
Australian Ethical closed the second quarter of fiscal 2026 with $14.08 billion in funds under management (FUM), marking a modest 1% decline from the previous quarter. This dip reflects a combination of negative investment performance amid volatile markets and the loss of a low-margin institutional mandate. However, the company’s retail and wholesale segments showed resilience, posting positive net inflows of $0.10 billion, largely driven by growth in superannuation accounts.
Retail Growth and Platform Transformation
Key to the retail uplift was Australian Ethical’s strategic enhancement of its digital marketing capabilities, which boosted new member acquisitions in the superannuation space. The completion of the transition to the GROW administration platform has not only streamlined operations but also unlocked cost efficiencies and scalability. These operational improvements position the company well to support ongoing growth and improve member experience.
Institutional Mandate Loss and Strategic Impact
The quarter saw the redemption of a $0.25 billion institutional mandate linked to Australian Unity Bank, following its sale to Bank Australia. While this outflow impacted FUM, Australian Ethical emphasized that the mandate was low-margin and its loss will have only a minor revenue impact, estimated at around $0.3 million annually. The company retains Australian Unity as a client through other fixed income funds, mitigating broader client relationship risks.
Investment Platform and ESG Leadership
Australian Ethical is progressing with the implementation of the Charles River investment platform, aiming to enhance operational efficiency and risk management. The firm’s commitment to ethical investing continues to earn industry accolades, including Money Magazine’s 2026 Best of the Best awards for ESG superannuation and pension products. These recognitions reinforce Australian Ethical’s standing as a leader in sustainable investment management.
Outlook and Leadership Strengthening
With a solid pipeline in newer channels and ongoing product innovation planned for the second half of the year, Australian Ethical is optimistic about sustained growth. The recent appointments of Anthony Lane as COO and Natalie Kooyman as CRO reflect a bolstering of the executive team to support this trajectory. The company anticipates announcing a strong half-year financial result in late February, signaling confidence despite current market headwinds.
Bottom Line?
Australian Ethical’s blend of operational upgrades and ethical investment leadership sets the stage for a pivotal half-year ahead.
Questions in the middle?
- How will the loss of the institutional mandate affect long-term revenue and client retention?
- What impact will the full rollout of the Charles River platform have on investment performance and costs?
- Can digital marketing gains in superannuation translate into sustained net inflows amid market volatility?
