Australian Ethical has been providing ethical investment services for more than 30 years. Our investment decisions are guided by the Australian Ethical Charter and its 23 principles which have remained unchanged since 1986. We have an in-house team of ethics analysts who measure new and existing investments against the charter. If potential investments satisfy the charter and meet other investment criteria, we invest; if ethical problems are identified in an existing investment we advocate for change – and if we aren’t satisfied with the response, we divest. For example, we divested from AMP for failing our ethical standards in 2018 and we divested from IOOF in January 2019 for the same reason. On the other hand, we actively seek out companies that have a positive impact on the planet, people and animals.
If a company passes our ethical screening process it’s over to our in-house investment team who have a combined 100 years of experience. Australian Ethical chief investment officer David Macri has just clocked up 10 years in his role and Andy Gracey has been a portfolio manager for over a decade. David and Andy lead a team of professional stock pickers who construct portfolios with the aim of producing long-term returns. Over the years we have proved that a strong ethical approach to investing does not detract from performance. In the 10 years to 31 December 2018 the Australian Shares option returned 9.8% net of fees and taxes and the Balanced (accumulation) option returned 5.8%. It’s worth noting that the Australian Shares option has achieved this return with a much lower level of risk than most of our competitors over the past three years. You can see the performance of all of our investment options here. Returns during 2018 were affected by large falls in global stock markets in the final quarter of the year, but our returns in both the Balanced (accumulation) and Australian Shares options during the period (and over the longer term) were better than our benchmark on a relative basis.
The investment process outlined above is starkly at odds with some of our competitors. We employ a team of in-house ethical analysts and investment professionals who apply both positive and negative screens to our portfolios. The portfolios are then actively managed by our investment team, with the exception of our International Shares option which uses an index-tracking approach (although our ethical screening process always applies). Australian Ethical takes a hands-on, deep green approach to ethical investing by using an in-house team of experts. We don’t cut corners when it comes to ethics, and that is part of the reason our fees are slightly higher than our competitors.
What are our fees?
As we have grown in scale throughout the years we have steadily reduced our fees. Since 2013 we’ve cut our super fees in just under half. Let’s take a look at the total fee for a $50,000 account invested in the balanced option as at 1 January 2019.
- First, there’s an investment fee of 0.64% per year, which equates to $320 for a $50,000 balance. This fee pays for all of the work done by the investment team and the ethics team, as well as costs incurred for things like custody, research and asset servicing.
- Next, there is an administration fee of $97 per year plus an additional 0.41% ($205) of your $50,000 balance. This fee pays for the administration and operating costs of our business including trustee services, account management, auditing services, marketing, regulatory compliance and payments to directors.
- Finally, there are indirect costs of 0.08% of your $50,000 balance which equates to $40 per year. These indirect costs relate to the specialist asset managers we use for property and alternative investments.
When you add that up, the total fee for $50,000 invested in the Australian Ethical Balanced (accumulation) option is $662 per year. Please refer to Australian Ethical Super’s Product Disclosure Statement for more information.
Where do your fees go?
Most of our fee revenue is used to pay our expenses. In 2017-18 we raised $36 million in cash revenue through our fees of which $28.6 million was used to pay our operating expenses. Australian Ethical is a for-profit company listed on the Australian Stock Exchange so we also recorded a net profit after tax of $5 million for 2017-18. Being a for-profit business allows us to reinvest in our business and deliver better service to our members. In addition, as stipulated by our constitution, 10% of our profits (after tax and before bonuses) must go to support not-for profit organisations through the Australian Ethical Foundation and our Community Grants Program. We set aside $710,000 for our Foundation in 2018. The remaining profit after business investment is distributed to our shareholders via dividends.
How do we compare?
Fees are certainly an important factor when choosing super funds but they are not the only thing to consider. You might like to look at our comparison pages with some of our competitors including AustralianSuper, Hostplus, AMP and FutureSuper. You should also compare things like the ethical screening process (if there is one), the investment process, the range of investment options, transparency (can you see what you’re invested in?) and advocacy work. It’s important to remember that fees and costs are also about the service you receive and the level of engagement of your fund managers. The team at Australian Ethical works hard every day to ensure your money is changing the world for the better as well as achieving competitive long-term returns.
This information is general information only and does not take account of your individual investment objectives, financial situation or needs. Before acting on it, consider seeking independent financial advice.