Australian Ethical sharpens private markets focus

Australian Ethical Investment is expanding its private markets capabilities and deepening its focus on measurable impact, as the ethical fund manager navigates a market in which some of the strongest performing companies feel outside its investment.

Australian Ethical chief investment officer Ludovic Theau says the Growth Opportunities Fund targets $25 million to $75 million private markets deals that larger funds tend to overlook, with early investments spanning renewable energy, battery storage and aged care.

For the year ended 30 June 2026, operating revenue increased 9% to $129.5 million, while underlying profit after tax rose 15% to $27.3 million. Net profit attributable to shareholders climbed 29% to $25.7 million, and the underlying cost to income ratio improved as the business continued to scale.

Australian Ethical chief executive John McMurdo said the company had maintained its purpose through changing market conditions and shifting investor priorities.

"This year marks 40 years of Australian Ethical. Across market cycles and shifting public attention, we have shown that long-term returns can be delivered while investing in companies shaping a better future," McMurdo said.

The manager recorder $664 million in positive organic net flows during FY26, up 134% on the previous year, with superannuation contributing $537 million. Compulsory contributions, rollover activity and end of financial year payments supported the result.

Institutional investment was another growth driver, particularly for the Growth Opportunities Fund, which received a $125 million cornerstone commitment from the Clean Energy Finance Corporation and a $500 million seed investment from Australian Ethical Super.

Australian Ethical chief investment officer Ludovic Thear said the private markets strategy delivered a gross return of 21.2% for the 12 months to June 2026, exceeding its long-term target of 11% to 13%.

However, performance across Australian equities was weaker, as interest rate pressures and geopolitical uncertainty weighed on sectors such as technology and healthcare. The company noted major miners and fossil fuel businesses, largely excluded from its investment universe, were among the stronger market performers.

Australian Ethical said its sustainability measures remained a key point of difference. Portfolio financed emissions intensity was 75% below its benchmark when scope 1, 2 and 3 emissions were included, while the manager conducted more than 230 engagements with companies and other organisations on issues including policy, deforestation and biodiversity.

The company also allocated a record $3.4 million to the Australian Ethical Foundation, taking donations since 2017 above $16 million.

Looking ahead, Australian Ethical expects positive inflows in FY27, supported superannuation growth, institutional expansion, product development and the rollout of a new mobile app.