Australian Ethical ‘not chasing short-term gains’ amid more modest FY24 return

Australian Ethical has announced a return of 6.8 per cent for its MySuper Balanced investment option for the financial year ended 30 June, consistent with its 10-year return of 6.8 per cent.

Meanwhile, its High Growth investment option delivered a 9.2 per cent return and its flagship fund, the Australian Shares strategy, returned 9.7 per cent.

According to Australian Ethical chief investment officer Ludovic Theau, the fund’s long-term performance proves that “you don’t have to sacrifice risk nor returns to invest ethically”.

“We aren’t in the business of chasing short-term gains at the risk of our members’ retirement savings,” Theau told Super Review.

He said the fund’s MySuper option was able to benefit from growth in global and local sharemarkets, adding that Australian equities have been a “key driver” of returns for its members over the last two decades.

“Our specialty in tech delivered strong gains from names such as Gentrack, Bravura Solutions, Nuix and Altium. Further afield, growth in the magnificent seven was a contributor to returns,” Theau said.

While equity markets have outperformed across the board, Theau said that it has been delivered by a select few companies.

“This lack of diversification flags as a warning sign, as the index and returns get progressively concentrated,” he said.

“In this environment, the case for equity markets being stretched is convincing and from our perspective the equity risk premium isn’t making sense. Our investment approach focuses on the underlying value of a company, and we have a strong focus on diversification and mitigating downside risk in portfolios.”

As such, Theau said that, where appropriate, the fund is looking to increase allocations to more defensive assets such as fixed income, currency, and infrastructure debt.

“This approach means we’re well positioned to navigate any uncertainties that may arise, while still participating in rising investments,” he said.

“Our investment philosophy includes mitigating volatility and minimising drawdown so that we better position our members to benefit from compound returns. We are [convinced] that this approach will deliver strong retirement outcomes to our super customers, many of whom are decades away from retirement.”

Looking ahead, Theau said that markets are divesting from harmful sectors because the “long-term value of the assets they produce is zero”.

“Our ethical approach has meant we’re ahead of that curve,” Theau said.

Acknowledging that the fund expects market volatility to continue, he said that the structural drivers supporting ethical investing and a more sustainable, low carbon future have “never been stronger”.

“Superannuation is a long-term investment, and we’re focused on delivering long-term risk adjusted returns to our members that also deliver better outcomes for people, animals, and the planet,” Theau said.

Earlier this month, ethical funds Future Super and Verve Super posted an annual return of 10.1 per cent and 9.9 per cent, respectively, for their Balanced Index options in FY24. 

At the time, parent company Future Group credited a responsible investment approach for the strong results delivered by the two funds.