AEF released a FUM update and earnings guidance for FY23. From their announcement:

The Christian Super merger has been a positive for AEF and FUM has reached 9b for the first time in their history.

Still recording net outflows in Managed Funds which is a little disappointing however this may start to reverse if we are at the start of a new bull market (time will tell I guess).

Earnings Guidance was a little more positive however:

UPAT last year came in at $10.2m which was down from FY21 of $11m. I do expect AEF to collect a performance fee on their High Conviction Fund given they have out performed the benchmark in the last 6 months (performance fees are calculated daily).

I see today's announcement as a good sign that the merger with Christian Super has had a benefit on the overall business. Growth trajectory seems to be positive again.

Unfortunately I did not buy in when the share price hit my valuation target so do not currently hold shares.

Full announcement here

Disc: Not held.

2 Announcements today from AEF

AEF and Christian Super merger

AEF and Christian super have signed a Successor Fund Transfer which will see Christian Super members be transferred to AEF later this year or early 2023.

This will bring in $1.96b of FUM into AEF

Full announcement here

FUM and Earnings Guidance Update

AEF recorded $102m of FUM inflows for the quarter bringing net inflows for FY22 to $943m. Total FUM at June 30 was $6.2b (up 2% since June 2021).

Performance fees of $0.4m for their "Emerging Companies Fund" were collected given its outperformance against the benchmark which will add $0.2m to UPAT, bringing earnings guidance range to between $10m-10.4m (FY21 UPAT was $11.1m).

There was no mention of performance fees for their "High Conviction Fund" so I'm assuming they did not beat the benchmark for this fund.

Full announcement here

My Takeaway:

The transfer of Christian Super members will bring in substantial FUM inflows which will benefit AEF going forward. However their performance on their funds was disappointing leading to a decrease in profit YOY.

Will update my valuation accordingly.

Will AEF collect a performance fee for FY22?

Australian Ethical gave guidance for UPAT for FY22 which will be between $9.8m and $10.2m. This is before calculation of performance fees which are due on June 30 2022. AEF only charges a performance fee on their "Emerging Companies Fund" and "High Conviction Fund".

According to their website, AEF charges a performance fee of 15% for the "High Conviction Fund" and 20% for the "Emerging Companies Fund". Both of these funds performance are listed on their website.

High Conviction Fund Performance:

*Note that the inception date for this fund was 01/10/21

Benchmark for this fund is the ASX300 Accumulation Index

Emerging Companies Fund Performance:

Wholesale:

Retail:

Benchmark for this fund is the S&P/ASX Small Industrials Accumulation Index.

Now interestingly, the performance fee is calculated daily, with any "negative performance" carried forward until there is "positive performance" against the benchmark. If I'm reading this correctly, I believe they may still collect some performance fees on both funds as performance in the first 3-6 months of the financial year/since inception outperformed the benchmark. However in the last 6 months, both funds have definitely underperformed the benchmark and I think that they may end up carrying forward these "negative performance" into the next financial year.

So lets assume UPAT of $10m prior to calculating performance fees. In FY21 they collected $2.9m in performance fees from only 1 fund (there are now 2 funds collecting performance fees) of which 1.9m flowed directly into profit (UPAT for FY21 was around $11.1m). If I was generous, I'll say that they may collect around $2m in performance fees of which perhaps around $1.2m-1.3m will flow through to UPAT giving them total UPAT of around $11.2m-$11.3m (so basically flat year on year).

Disc: Not Held.