Australian Ethical managed funds review: Options, features and fees

Australian Ethical is a wealth management company specialising in ESG

It has 9 different managed fund options which are focused on sustainability, clean energy, waste management, recycling, health and responsible banking. It excludes investments in mining activities, weapons, tobacco and gambling to name a few.

Australian Ethical is a wealth management company that actively seeks out investments that are positive for society and the environment while avoiding those deemed harmful.

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Our verdict

Australian Ethical does what is said on the label. It allows investors to gain access to actively managed ethically based funds.

While the company excels in ESG investing, the fund charges a premium for some of its services, especially compared to its competitor.

However, with cheaper entry points, a long track record of performance and a focus on ESG, the fund can certainly help investors ‘do the right thing’ while growing their nest egg.

Good for

  • ESG-aligned investors
  • Smaller retail investors who want a diversified portfolio for $500
  • Investors who do not want to use their capital to support certain industries
  • There are more and more ethical investments becoming available, giving consumers lots of choice

Not so great for

  • Investors who want to passively track an index
  • Investors bullish on commodity stocks

Australian Ethical key features

What are the key features of Australian Ethical managed funds?

  • Ethical investments. Regardless of which investment option investors choose, all 9 funds follow Australian Ethical's unique ethical screening charter, which seeks to increase exposure to positive companies while excluding negative industries.
  • Choose from 9 pre-mixed funds. Investors can choose from 9 ready-made diversified investment options ranging from lower-risk to more growth-focused.
  • Award-winning managed funds. Australian Ethical's focus on sustainable investment does not detract from financial outcomes for investors with the fund winning various financial industry awards over its time.
  • Lower-cost initial investing. Retail investors can begin investing with Australian Ethical from as little as $500 plus monthly investments.

Which investment options are available with Australian Ethical managed funds?

Fund description

Minimum investment

Risk

Fees

High Conviction Fund. This is an actively managed share portfolio of between 20 and 35 select shares predominantly from the ASX 300 based on their social, environmental and financial credentials. The fund aims to beat the S&P/ASX 300 Accumulation Index and recommends investors take a long-term approach, investing for at least 7–10 years.$25,000 (wholesale)Very highManagement fee – 0.80% p.a.

Performance fee – 15%

Australian Share Fund. This is an actively managed fund with management generally selecting shares for growth rather than income. It is focused on the ASX and sections are also based on their social, environmental and financial credentials. The fund aims to beat the S&P/ASX 300 Accumulation Index and recommends investors take a long-term approach, investing for at least 7 years.$1,000, or $500 if you start a regular investment plan of at least $100 per monthVery highManagement fee – 1.69% p.a.
Emerging Companies Fund. An actively managed fund based on a diversified bunch of shares in small cap companies, once again based on their social, environmental and financial credentials. The fund aims to beat the S&P/ASX 300 Accumulation Index and recommends investors take a long-term approach, investing for at least 7 years.$1,000, or $500 if you start a regular investment plan of at least $100 per monthVery highManagement costs – 1.69%

Performance fee – 20%

International Share Fund. An actively managed fund where investors own a pool of assets overseas. Each of the investments must meet the Australian Ethical ESG standards. The fund again suggests a long-term approach of at least 7 years.$1,000, or $500 if you start a regular investment plan of at least $100 per monthHighManagement fee – 0.99%
Balanced Fund. A less risky option for investors, the fund tries to balance capital growth and moderate levels of income. Investors own a combination of Australian and New Zealand small caps, international shares, property, alternative assets, interest-bearing securities and cash. The fund suggests investors hold for 5 or more years.$1,000, or $500 if you start a regular investment plan of at least $100 per monthMedium to highManagement fee – 1.51%
High Growth Fund. An actively managed fund where investors own a mixture of ethically based Australian and international shares, unlisted property and alternative assets. The fund's main objective is to return investors CPI plus 4.5% over the long term. It is recommended that investors in the fund leave their money for at least 10 years.$1,000, or $500 if you start a regular investment plan of at least $100 per monthHighManagement fee – 1.39% p.a.
Diversified. The fund aims to give investors a diversified share portfolio of Australian and international companies that meet the Australian Ethical ESG guidelines. Generally investors will be exposed to Australian companies in the ASX 200. The fund recommends investors take a long-term approach investing for at least 7 years.$1,000, or $500 if you start a regular investment plan of at least $100 per monthHighManagement fee – 1.39%
Fixed Interest Fund. This is one of the less risky options offered by Australian Ethical, with investors primarily invested in fixed rate bonds from issuers such as Commonwealth and state governments, banks and other corporate lenders that meet an ethical framework. Investors are advised to keep their money in the fund for a minimum of 3 years.$1,000, or $500 if you start a regular investment plan of at least $100 per monthLow to mediumManagement fee – 0.5%
Income fund. This is the least risky fund that is offered by Australian Ethical. The fund allows investors to gain access to a diversified mix of interest-bearing income investments, ranging from bonds to short-dated deposited and high-grade mortgage-backed securities. The fund suggests holding your money there for at least 1 year.$1,000, or $500 if you start a regular investment plan of at least $100 per monthVery lowManagement fee – 0.20%

 

*Australian Ethical provides the risk ratings

*Keep in mind lower risk generally means lower return

Why Australian Ethical?

This is a rare win for investors who can do "the right thing" yet still get ahead financially.

Australian Ethical certainly appeals to investors who are looking to align their morals with their money, but the company goes further than that.

Australian Ethical will appeal to investors who are looking to align their morals with their financial outcomes.

According to the Mercer Investment Performance Survey, Australian Ethical's Australian Shares Wholesale Fund ranks number second over 1 and 3 years and ranks third over 5 years out of 81 funds recorded.

How do I sign up?

You can become an Australian Ethical mutual fund member by filling out the online application form on its site.

According to Australian Ethical, this is a 10-minute process, but you will need a few things ready before you begin.

You'll need to provide:

  • Your full name, date of birth and gender
  • Your Australian residential address
  • Contact information
  • Investor details, such as name and entity information (if applying for SMSF, trust or company)
  • Your tax file number (TFN)
  • Banking information, for withdrawals and distribution

Once you've added your information and Australian Ethical has successfully identified you, you'll be sent the details to your new account.

Customer support

Australian Ethical provides customer support for members from Monday to Friday, 8:30am to 5:30pm AEST via the phone or email as well as a frequently asked questions subsection.

In order to get in contact if you're having any issues click on the contact page on Australian Ethical's site.

Bottom line

Australian Ethical will clearly appeal to investors who prefer an ESG approach to investing.

The managed funds actually go beyond just "doing the right thing" with a strong track record of achieving growth targets.

However, investors will have to pay a premium for this service with other funds providing cheaper options for investors.Despite this, investors with an ESG lens who want to achieve longer-term financial goals could look at funds like Australian Ethical.

You can learn more about Australian Ethical's super funds with our separate guide.

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

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