Cameron Blanks from Pacific Equity Partners speaks to James Dunn at The Inside Network’s Alternatives Symposium in Melbourne on looking through the cycles and catalysing growth. The Inside Adviser
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Australian Ethical to bulk up with potential fund merger
Leading responsible and sustainable investment manager Australian Ethical (ASX:AEF) this week announced their intention to merge with industry fund Christian Super. If completed, the combined entity would manage some $9 billion and serve around 100,000 members across the country.
Christian Super, and similar religious-leaning super funds were some of the earliest adopters of the ESG or Environmental, Social and Governance approach to investing that has been incredibly popular today. Whilst generally titled to the use of negative screens to avoid ‘vices’, reports suggest that Christian Super held as much as $150 million ‘impact’ investments.
These are assets and opportunities where an investor is seeking both investment returns, but also having a positive impact on the community or environment, or both. The deal highlights more collateral damage resulting from APRA’s performance test, which forces underperforming funds to either shut down or merge.
Christian Super had performed poorly over the last few years for multiple reasons, whereas Australian Ethical, which is a retail rather than an industry/union super fund, had been near the top of most performance tables.
Whilst due diligence is not expected to be completed until at least May this year and any merger still several months away, it appears to be a positive move by the group, as they seek to build scale in what is a quickly consolidating market. Australian Ethical chairman Steve Gibbs said he was delighted by the opportunity, which he viewed as “an endorsement of our purpose and investment philosophy”. Christian Super chairman Neville Cox also said there were many synergies in the two funds’ approach.
One such area appears to be member engagement, of which Australian Ethical appears to be a market leader. One of the challenges faced by the ever growing, internalised $100 billion industry fund behemoths is how to keep their millions of members engaged at varying stages of their lifestyle. This has been the biggest challenge, but the social and general media following of the ethical manager appears to have found the right recipe.
According to the announcement to the ASX, the resultant entity will be delivered via a successor fund transfer, with Christian Super’s $2.5 billion to be combined with the larger $6.5 billion in assets managed by Australian Ethical.
